Should Renewable Energy Be Afraid of Basel III Banking Standards ...

by travisbradford on October 20, 2012

The Basel III Accords, the latest set of international banking standards from the Basel Committee on Banking and Supervision, are set to take effect in just a few short months. This new banking regime was designed to create a more resilient and robust international banking system with a suite of capital adequacy, leverage, and liquidity requirements. Basel III will have impacts across the broader commercial lending market, though the renewable energy (RE) sector, with its heavy reliance on project finance, will be particularly vulnerable to the new liquidity standards.

The general thrust of these standards is to ensure that banks withhold sufficient levels of high quality, stable, and unencumbered assets throughout all of their activities so that they may better weather both short-term and long-term periods of stress. Regulating liquidity is a new feature of the Basel regime (neither Basel I nor II included any liquidity provisions), and it is expected to complicate the economics of certain types of lending. Project finance loans?which are characterized by long tenors (from 10 years up to 40 years in some cases) and are serviced by income-generating assets that may not have a ready secondary market during an economic shock ? comprise one such type.

via Should Renewable Energy Be Afraid of Basel III Banking Standards? | Renewable Energy News Article.

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Source: http://prometheus.org/2012/10/20/should-renewable-energy-be-afraid-of-basel-iii-banking-standards/

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