Resources for Basel II Capital Accord (Basel II)

Jeremy Warner's Outlook: Basel II reason for cheer among bankers

Basel II

While all attention in the City is focused on the gladiatorial battle for ABN Amro - a propos of which, rather dull results from Royal Bank of Scotland yesterday marked by poor figures from Citizens in the US - the rest of the banking world moves on, and in particular it worries about whether the economic boom of recent years is finally drawing to a close.

As I have argued, this is unlikely to be the case, but banking is a many-headed industry and it may well be that certain bits of it do indeed face tougher times. With a fast cooling housing market, the focus of this concern tends to be the mortgage banks, where share prices have been under pressure.

Yet even here, the bear case has been overstated. It might sound an odd thing to say, but there is in fact a big difference between the housing and mortgage markets. As interest rates rise, the number of housing transactions will slow and, in certain parts of the country, there may be financial distress, with falling prices and increased repossessions. Yet provided the economy overall remains healthy and unemployment low, there is unlikely to be a crash.

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