No. 157 - Looking ahead to Basel 3: Italian banks on the move

In December 2010 the Basel Committee on Banking Supervision published a set of new regulations for banks in response to the financial crisis. This paper aims at evaluating the possible effects of the new framework on banks' available regulatory capital and risk-weighted assets and assessing their positioning with respect to future leverage and liquidity constraints. The evidence, based on the data collected from a representative sample of 13 Italian banking groups updated to 30 June 2012, show that capital and liquidity positions relatively to the Basel 3 targets have improved considerably over the last two years. Furthermore, compared to banks in other jurisdictions, Italian intermediaries are likely to be less affected by the reform, due to a business model more focused on credit intermediation. Importantly, the estimates cannot be interpreted as a forecast of capital and liquidity needs as they do not incorporate any assumption about future balance-sheet items or banks' reactions to the changing regulatory and economic environment.