Basel III & Banana plantations – December 2023

Basel III is an international regulatory accord that introduced a set of reforms designed to mitigate risk within the banking sector by requiring banks to maintain certain leverage ratios and keep certain levels of reserve capital on hand. Basel III Endgame is currently under preliminary consultation with bosses of big banks discussing it in Congress yesterday. Basel III Endgame would require banks to increase capital cushions by 20% ($145 billion) to absorb unexpected losses. This could negatively affect big banks with JP Morgan leading the way with $40bn in excess capital, followed by Bank of America with $31bn and Wells Fargo at $26bn, the list drops off a bit after.

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News of Fusarium odoratissimum, or Tropical Race 4 (TP4), was found in banana plantations in Colombia in 2019, Peru in 2021 and Venezuela in May. TP4 is an naturally occuring disease that can be easy to transmit from one place to another and destroys banana trees. It currently has no treatments, cures or preventive measures. It could possibly travel to other South American or Central American countries and disturb plantations of Cavendish bananas, the one most likely found in grocery stores (it is 99% of the market). This could negatively affect banana-exporters like Dole PLC (NYSE: DOLE).

I do not have any positions in any company mentioned in this article.

Sources: Bloomberg