Option B: Basel III ??® Issues and implications Under Basel, banks can determine how much debt they can take on by using their own models and computer systems to calculate how risky their assets are, among other methods. The higher the risk, the less money banks can borrow and lend, in turn cutting income banks can earn. In other words, this part of the Basel rules, known as the ??®internal-ratings based approach,??® gives banks a chance to monkey with their risk models to boost profit.Fed Governor Daniel Tarullo Background: You have been assigned the task of investigating the implications of the implementation of Basel III to the Chief Financial Officer (CFO) of the banking institution you are working for. Ensuring banks??® future: Using the Cosimano and Hakura (2011) article on bank behaviour in response to the new Capital Accord for banks as the starting point , write a 2,000-word business report on the following: a. Discuss critically the background to Basel III and impact on individual banks and the financial global system.b. What has been the impact of the new capital requirements in relation to banks??® lending activity around the world?c. Discuss the concept of ??®countercyclical capital??® and the new ??®leverage ratio??® and their likely effects on banks and the banking system as a whole. Learning outcomes tested by the report Subject-specific skills??® Understand and explain the developments in banking regulations in relation to capital requirements.??® Appreciate the importance of countercyclical capital in banking regulation.??® Familiarise yourselves with the impact of regulatory changes on bank capital.??® Explain and analyse the policies adopted by different banks in different countries in relation to implementing the new capital rules.??® Critically analyse the current challenges in the area of capital requirement regulation.