He believes that banks are using Basel III as a scapegoat and hiding behind the financial measure as an excuse not to lend to small businesses.
“Basel III may not be as strict as many fear, and implementation is to be phased over time, for a very good reason,” he said.
“Worldwide economies are still on a knife-edge – something too authoritative now could do more harm than good.
“But even though banks have been relieved by the outcome, some are still using Basel as an excuse not to lend. They’re making a scapegoat out of the Accord.”
The third set of rules from the Basel Committee on Banking Supervision has tightened the definition of a bank’s Tier 1 capital – the amount a bank must hold as a safety measure for any future crashes.
Banks have argued that having to hold large amounts of capital restricts them from lending, as the more banks lend the more capital they must hold.
But the tightening in Basel III was not as harsh as many feared it would be, thanks to pressure from France and Germany fearful of the impact on their economies.
Galitz says this should allow banks to start lending again, especially to new businesses, but firms are still using Basel as a scapegoat.
“The Committee seemingly allowed Basel III to be less restrictive in the hope economies will continue to grow,” said Galitz.
“But growth will slowly grind to a halt if banks do not start lending to SMEs. Lending to small or new businesses is obviously a risk, but the SME sector is a major source of economic development and employment.
“The economy needs these businesses to start performing.”
