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Beverly Chandler, Opalesque London:

A new report from Celent entitled Basel III and Liquidity Risk Management Solutions; Balancing Compliance and Profitability finds that the implementation of the Basel III requirements has proven to be a challenge for many financial institutions. Celent writes: "Banks that were well-capitalized in Europe and the US under the Basel II requirements will find it hard to become compliant with Basel III."

Celent finds that globally Basel III’s interconnected nature dominates executive minds. The firm writes: "Basel III will cause banks to exit unprofitable businesses and reduce lending activities, with possible successive second and third order impact and contagion effect to other sectors (e.g., long-term financing for corporates and small businesses)."

They predict that liquidity shortages may open up opportunities for competition for banks from an unlikely source, with the shadow banking sector and their continuous innovations looking to fill in gaps left by banks. "Risk management implementation difficulties of Basel III require a disciplined approach to orchestration of multiple competencies across the organization to address impacts on strategy, technology, and staff" the report says, while the competent allocation of financial resources, capital, and risk at a firmwide level is becomin......................

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