With all the clamouring from banks in the West about the difficulties of implementing the Basel III framework, it is easy to forget that emerging market lenders will also be affected. For them, the concern is not so much the new capital levels – the largest emerging market banks in countries such as Brazil, Russia and Mexico already have high capital adequacy ratios.
Instead, the worst headaches are being caused by Basel III’s liquidity requirements. These have two parts: a liquidity coverage ratio (LCR), which will make banks hold enough easily salable assets to survive a month-long funding squeeze; and a net stable funding ratio (NSFR), which covers a longer period and will in practice force lenders to match the tenor of their liabilities and assets more closely.
