Possible Unintended Consequences of Basel
III and Solvency II – References and other material
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This paper explores possible implications of the near
simultaneous implementation of Basel III and Solvency II but their materially
different backgrounds and development processes.
A presentation based on this paper (given to both the
Milliman Forum and the International Actuarial Association) is available here.
References within the paper are available below.
Paper abstract
In today’s financial system, complex financial institutions
are connected through an opaque network of financial exposures. These
connections contribute to financial deepening and greater savings allocation
efficiency, but are also unstable channels of contagion. Basel III and Solvency
II should improve the stability of these connections, but could have unintended
consequences for cost of capital, funding patterns, interconnectedness, and
risk migration.