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Other questions relate to the composition of capital. For example, the requirement for banks to hold sufficient cash Links of London government paper to meet a liquidity coverage ratio and survive a day market crisis may be difficult to meet for emerging market banks operating in countries without deep, liquid government bond markets. As such, the Basel Committee agreed that this requirement would be ‘observational’ until , but other questions remain. Even if these liquidity requirements are met, we question whether the perceived risk of government paper is line with the actual risk what of sovereign Links of London Charm Bracelet in ‘safe’ countries that are, in BMI’s view, at risk of restructuring or defaulting, including some in the eurozone such as Greece and Portugal? Ultimately, Basel III’s success will be determined by whether it improves the stability of the banking sector while not stifling innovation, profitability and lending. We believe it is an improvement on the previous framework but several questions still need to be answered. Latin America Banking Sector Outlook Peru Offers Greatest Potential Based on macro and industry metrics, we believe Peru’s commercial banking sector offers the greatest potential in Latin America Links of London Classic 18ct Gold Maple Leaf Charm an investment perspective, whereas Chile, Brazil and Panama appear to have limited scope to expand traditional banking practices. We also believe Mexico and Guatemala offer significant potential, although this is likely to play out over a longer period. Thanks to prudential regulation and a lack of crossborder lending few banking sectors in Latin America face systemic risks, even with the wave of foreign capital entering the region. From an investment perspective, however, there is a wide divergence in terms of which markets offer the greatest potential for gains. Although many factors determine a banking sector’s mediumtolongterm investment potential, we focus on three key variables macroeconomic outlook, growth potential and the business environment. Macroeconomic Links of London Classic Frown Charm In our view, the most important macroeconomic variables to consider when analysing commercial banking sector potential are real GDP growth particularly GDP per capita growth and inflation.