If markets continue with such expectation, banks would likely “hoard” capital and stop lending which will exacerbate the downturn. The communication challenge, therefore, is to educate the market on the Basel III notion of buffers and their manner of use so that these safeguards function the way they are intended to. 34.
The second communication challenge under the proposed Basel III package comes from the “comply or explain” framework under which countries have the option to deviate from certain components of the package and explain why they have deviated.