The Basel III reforms aim to increase the resilience of the global banking system to avoid another financial crisis. The reforms introduce a set of capital buffers, as well as more stringent capital and liquidity requirements. While European banks have been following Basel II for years, American banks have yet to apply those changes, and now they'll also have to implement Basel III requirements.
To achieve the requirements, banks can either reduce their riskier assets (by selling some, for example) or increase capital (by issuing equity, for example). While most analysts don't believe the big U.S. banks will be forced to raise capital just for regulatory purposes, some worry that sharp cuts in assets could force banks to curb lending or raise borrowing costs, the FT adds. This could have ramifications for the economy.