According to Bloomberg Business, Investec South Africa CEO Cumesh Moodliar is advocating for reforms to Basel III capital requirement rules to create fairer competition between banks. The South Africa- and UK-listed lender’s chief executive argues that differing approaches by the US, Europe, and UK have created significant disadvantages for emerging market banks. Moodliar specifically highlighted that developing market lenders already face higher capital requirements and pay more for debt due to perceived African project risks. The current regulatory landscape imposes what he describes as a steep cost burden on banks operating in developing economies compared to their developed-market peers.
The Emerging Market Disadvantage
Here’s the thing about global banking regulations – they’re supposed to create stability, but they often end up reinforcing existing power structures. Moodliar’s argument hits on a fundamental truth: emerging market banks get squeezed from both sides. They have to hold more capital against loans while simultaneously paying higher rates to borrow money themselves. It’s basically a double whammy that makes it harder for them to compete with European and American giants.
What This Means for Banking Competition
If Basel III reforms actually happen, we could see some interesting shifts in the competitive landscape. Emerging market banks might finally get some breathing room to compete on more equal footing. But let’s be real – regulatory changes move at glacial speeds, especially when they involve international coordination between the US, Europe and UK. The bigger question is whether developed market banks will push back against any changes that might reduce their competitive advantage. After all, why would they want to level a playing field that’s currently tilted in their favor?
Broader Economic Implications
This isn’t just about banking profits – it’s about economic development. When emerging market banks face higher costs, those costs get passed along to businesses and consumers in developing economies. Higher lending rates can slow down infrastructure projects, business expansion, and overall economic growth. So what Moodliar is really arguing for isn’t just fairness between banks, but creating conditions that support broader economic development in markets that need it most.
