Loans and financial matters

No account is taken of counterparty risk in determining regulatory capital requirements under the terms of the original Basel Accord. A loan to a top-rated corporate is treated in exactly the same way as an exposure to a small, high-risk company. This state of affairs is due to change in 2006–2007 when a new Basel Accord is adopted but even then corporate loans are likely to attract a higher regulatory capital charge than retail loans.

Many large blue-chip corporates have better credit ratings than the banks themselves. There is little reason why such a corporate should pay more for loans from a bank than it receives on any deposits it makes with the bank. Disintermediation. Another major change has been the increased access for corporates to capital markets. Bond, equity and wholesale money markets provide a means for corporates to go directly to investors bypassing the commercial banks as a result. This has been helped by the better credit ratings that many corporates have relative to their aspiring lenders.
This process has been given the accurate, albeit unwieldy, term of disintermediation. These trends have benefited the investment banks at the expense of the traditional commercial banks. The former are able to earn fees from the issuance process and from underwriting guarantees.