Part 6/10:
Higher capital demands could lead to a reduction in high-risk mortgage issuance, notably affecting affordable housing initiatives. The collapse of Silicon Valley Bank in 2023, although not directly caused by Basel III, highlighted vulnerabilities in midsized banks. The reforms aim to address such issues by factoring in market risks but are not solely responsible for such crises.
Regulatory Flexibility and Global Adoption
In practice, countries differ in their adoption of Basel III. Canada has delayed certain measures amid economic uncertainty, while Japan and Switzerland fully implemented the standards. This patchwork can cause regulatory fragmentation, creating loopholes and arbitrage opportunities that could undermine global financial stability.