Hong Kong's small- and medium-sized enterprises (SMEs) will not suffer the credit squeeze feared by some as a result of new risk-based tests that banks may use under the “Basel II” Capital Accord to calculate the amount of capital they need to support their loans, PricewaterhouseCoopers (PwC) says.
In the case of some banks, PwC adds, Basel II could free up existing regulatory capital for more productive use, which could boost their earnings and contribute to economic growth.
The financial services firm made these forecasts after completing a new study for the European Commission that examined the economic impact of Basel II on the European Union's financial services sector.
The study concluded that Basel II proposals should lead to a small reduction in bank capital requirements and thus provide a small stimulus to the economy of the EU.
