Basel III rules may cause another property-fuelled crisis

Singapore

PROPERTY was behind the last big financial crisis, and if the fallout from Brexit worsens, it may be behind the next. No wonder: real estate is an outsized part of banks' books, whether through mortgage loans or as collateral for other lending. So any blow to values can hurt the financial system - and now, investors can blame it on regulators.

Basel III, the set of banking rules created after the 2008 crisis to bulletproof the system against another major blow-up, may in a cruel twist have increased banks' sensitivity to property. A regulation, now being revised, allowed banks to reduce the capital they set aside for loans to risky borrowers as long as there was real estate attached to the deal.