Regulatory changes help set stage for growth in 2013 and mild downturn in 2014.
I have mentioned at many of my presentations that the Basel III regulations coming would tighten up the global credit markets, raise interest rates, and raise borrowing costs. There was good news from the Basel Committee today. They have lowered the capital and liquidity requirements that would have caused banks to restrict lending.
They have also broadened the definition of high-liquid assets while lowering their expectations of how much cash would be needed to cover 30 days of cash withdrawals. This is a return to sound thinking and it bodes very well for our forecast of more economic growth in 2013 and for mildness in the downturn in 2014.
There is one additional piece of information that I found particularly interesting. The banks have up to 2019 to meet the full requirements of the Liquidity Coverage Ratio. That year will sound very familiar to anyone who has heard Brian, Jeff, Andrew or I speak anywhere.