THE IMPACT OF THE NEW BASEL ACCORD ON THE SUPPLY OF CAPITAL TO EMERGING MARKET ECONOMIES

The New Basel Accord aims to ensure that international banks’regulatory capital reflects more closely the credit quality of their loan portfolios. This meansthat capital charges will be higher for lending to low credit quality borrowers. Some haveargued that this increased risk sensitivity will lead to a curtailment in the supply of capital toemerging market economies (EMEs) .There are several reasons to think that the impact of thenew Accord is unlikely to be as dramatic as some commentators have suggested.