Most of the criticism directed at Basel III is that higher capital ratios will have an adverse impact on lending because of the high opportunity cost of holding capital. In the economies of emerging Europe, including South East Europe, this criticism is heard less often, given that foreign ownership implies that decisions on capital increases are made at the group or parent level. More generally, the proposition that an increase in capital leads to a reduction in lending is often not validated by the facts. The cost of bank equity, the compensation an investor requires for a bank, falls as the bank’s safety and soundness improve. As equity investors are last in the priority structure in case of a possible bankruptcy, higher capital allocation is likely to increase the confidence in the whole banking sector, which is also an aim of the Basel system. To conclude, the Basel III document is an important milestone in development of international financial regulation. It has both a regulatory and constitutive dimension: on the one hand, it operates as a further development requiring central banks and other regulators to behave in accordance with its principles in order to strengthen financial stability; on the other hand it establishes even firmer the Basel Committee on Bank Supervision as the pivot of international regulatory cooperation centred on the concept of risk-weight. But Basel III also invites the question of a perhaps different representation of entities taking part in its consultative phases.

Dimitar Bogov: Impact of international regulatory cooperation on the Republic of Macedonia Opening speech by Mr Dimitar Bogov, Governor of the National Bank of the Republic of Macedonia, at the 36th meeting of the European Banking Federation, Skopje, 7 June 2013. *  *  *  Distinguished participants to the 36th European Banking Federation Associates’ Meeting, Dear Guests, Ladies and Gentlemen, Let me wish you a very warm welcome at today’s meeting. The topic I want to dedicate my welcoming speech on is international regulatory cooperation. The banking system in the Republic of Macedonia is predominantly foreign-owned and consists mostly of either subsidiaries of foreign banks or of banks owned by foreign portfolio investors. Foreign ownership has assisted banks in their efforts to follow sound market practice, develop and maintain high credit standards and receive encouragement and advice from their larger and longer established parent institutions. The global financial crisis and Eurozone debt crisis have not fundamentally changed this relationship. Nevertheless, these exceptional crises do constitute a real challenge for international and global banking. The Vienna Initiative, the framework to safeguard the financial stability of emerging Europe, has been valuable in raising awareness that the deleveraging process in developed Europe should not unduly restrict operations of bank subsidiaries in emerging Europe. In this context, it is important to note that even before the crises stroke, deposits raised in the Macedonian banking system by the predominantly foreign-owned domestic banks were lent by those same banks to borrowers in the Republic of Macedonia.