Capital Markets and Emerging Markets Policy

EMAC calls for a Dialogue with the Official Sector on the Implications of the New Regulatory Framework for EM Institutions

October 25, 2012

The IIF’s Emerging Markets Advisory Council (EMAC), at its October 11 meeting in Tokyo, expressed concerns that certain aspects of the new regulations on liquidity and capital requirements in the Basel III framework, especially for trade and commodity financing, credit to SMEs, and infrastructure finance, could unduly constrain the operations of emerging markets banks in areas that are vital to the growth and development of emerging economies.

Furthermore, the more conservative application of some of the rules in emerging markets and the direct link between the capital charge of financial assets and the sovereign credit ratings produce outcomes (e.g. in calculating the Risk Weighted Assets) that are clearly disadvantageous to emerging markets banks. The Council noted the interest of the Financial Stability Board (FSB) in addressing some of these concerns and called for initiating a dialogue between the Council and the FSB (and other relevant global regulatory bodies) in order to arrive at a cooperative and satisfactory resolution of these issues.