In all likelihood, EMEs will see the cost of credit going up at a time of growing credit demand arising from strong growth, structural transformation of the economy and financial deepening. The challenge for EMEs will be to balance the tension between implementing Basel III and keeping the cost of credit at an affordable level.
In terms of capital, banks in EMEs typically have higher capital ratios, and can be expected to comfortably meet the higher Basel III capital requirements. However, going forward, as credit expands and bank balance sheets grow, banks will find it necessary to raise further capital to conform to the Basel III requirement. Basel III also poses non-cost challenges.