Q: In January 2017, banks took another step closer to fully implementing the post-crisis regulations set out by the Basel Committee on Banking Supervision, as part of the phase-in arrangements. In addition, the Basel III reforms triggered a new interpretation on operating cash. What are the main considerations for institutions going forward?
A: That is true: under Basel III there is a much stricter definition of the term ‘operating cash’. Under Basel I and II, operating cash could pretty much include all types of cash received from a depositor and, therefore, the more deposits a bank held, the better. However, now under Basel III, there is a need to understand the correlation of clients’ deposits to the clients’ product usage depth with the bank to determine whether a client deposit is ‘good’ or not.