The following is an extract from an article in the Weekend Australian Business section by Andrew Inwood , CEO of Core Data (research organisation).
"The Australian Prudential Regulation Authority is determined to implement the Basel III reforms in Australia, a set of laws that fundamentally change the amounts and types of cash Australian banks need to hold and which make long term savings deeply unattractive to banks.
All over Australia, bank chiefs are working hard to provide solutions to wealthy savers to encourage them away from long term cash holdings and into other investment products before the laws take effect and affect the banks' lending ability and profits.
The sleeping asset classes in this segment are the SMSF term deposits and high interest savings accounts, worth an estimated $100 billion at December 31 last year. When Basel III is introduced, they will need to be invested somewhere else or their returns effectively reduced to zero."
Could someone expand on this?
Why would long term savings become unattractive to banks ? What does Basel III involve?