Basel III and Banking Supervision: Taxes Are of Capital Importance

Few will have missed that capital requirements for banks have been tightened significantly in response to the financial crisis. The new rules are contained in what is called Basel III. Capital Requirements Directive IV implements Basel III in the EU. The rules are very detailed and have a dramatic impact on banks. Among other things, banks will be required to increase the level of their capital and improve the quality thereof. Although tax plays an important role in this, it has received very little attention to date. This article discusses the role of taxes and their impact on banks’ capital.