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Debt maturity - complexity rises to a peak / run up to the introduction of Basell III
Our original paper had been published in the aftermath of the global financial crisis. Although this turned into a broader economic crisis, it had started as a banking and liquidity crisis.
At the time our paper was originally published in the autumn of 2010, there had already been considerable discussion of the looming debt bubble. This had focused on the volume of debt to be refinanced and whether or not there was sufficient capital to fill the void. There was also concern that it was not only the
volume, but also the complexity that was set to increase as the proportion of the debt represented by syndicated loans and Commercial Mortgage Backed Securities (CMBS) increases significantly. With this, the process of negotiation becomes more complex and the eventual outcome in each case less certain.
The other huge concern was the impact of regulatory change, in particular the pressure on the banks as they cope with the introduction of Basel III. It was clear even then that
the banks would need either to raise new capital or to reduce the volume and risk profile of their loan assets. Basel III is a global, regulatory framework governing bank capital adequacy, stress testing and liquidity. Within the European Union, it is implemented by the Capital Requirements Directive IV (CRD IV). At the time of the original paper, the capital requirement element of Basel III was due to be implemented from 2013 to 2015.