Abstract
The Second Capital Accord of the Basel Committee on Banking Supervision ("Basel II") was intended to address capital sufficiency amongst institutions lending in risky sectors. Since its introduction, the world economy has gone through categorically unique depressions, hallmarked by the 2008 financial crises. Scrambling to respond to the unique challenges posed by unprecedented failures throughout the international banking community, the Basel Committee's latest charge has been to revamp its prior accords while formulating new methodologies intended to avoid the reoccurrence of the catastrophes of the past four years: regulations that comprise the Third Basel Capital Accord ("Basel III"). These new prescriptions on asset-based financing have been criticized by some as oppressive and a hindrance to commerce, yet praised by others as a hopeful dose of preventive medicine that will foster long-term stability.1 Ultimately, the practical effects on access to capital in asset finance transactions posed by Basel III will reflect the banking sector’s need to comply with its terms and responses to capital needs addressed from sources inside and outside the scope of Basel III’s applicability. This article is intended to: (1) illustrate the critical differences between the current (Second) Basel Accord and the impending Third Accord in the historical context of the financial crises of 2007-2009 and the resulting environment that has evolved since; (2) analyze the anticipated impact of the Third Accord on the specific activity of asset-based finance; and (3) identify practical scenarios that conceptualize the implementation of Third Accord requirements in hypothetical transactions that are both commercially feasible and Accord-compliant. In many aspects, this article is intended as the next installment of an article published in 2004, which addressed the anticipated impact of Basel II on institutional lending in transportation finance and used shipping finance as its primary paradigm.
Recommended Citation
Angela L. Rosa, Weathering the Tempest: the Impact of the Basel III Capital Accord on Asset Finance, 14 Tenn. J. Bus. L. 179 (2013) , DOI: https://doi.org/10.70658/4486-1457.1267https://ir.law.utk.edu/transactions/vol14/iss2/4