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Basel III requires an increase in the size of banks’ equity relative to their loans and a more formal assessment of risk, says Tim Ambler. Big companies will be able to shop around within the competitive international markets. However, in a situation where five big banks dominate the UK market, Britain’s small and medium-sized enterprises (SMEs) will be hit both by the reduced availability of loans and by higher interest rates. Since SMEs drive the UK economy, the consequence of Basel III is negative for the UK.

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