Other elements were due to be phased in by 2018. By the time CRD IV had been implemented, the timetable had moved to a phased introduction from 1st January 2014 to 2019. Key elements of the capital buffer requirements started coming into phased effect from 1st January 2016.
The phased introduction of Basel III has allowed time for new entrants to come into the market as lenders, particularly insurers and debt funds. It has also allowed significant recapitalisation with equity such that leverage levels are much less of an issue than they were in 2008.
Some further thoughts
The period since 2010 has seen a significant growth in alternative lenders across the debt spectrum. In particular, we have seen many more debt funds. Solvency II (see here) has encouraged life insurance companies to become real estate lenders.
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We have advised on the structure and operation of real estate debt funds.
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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.