In EU, Banks have changed their behaviour lately, e.g. as acting liquidity providers to certain markets like notes etc.
Introduction of Basel III is probably one reason (tighter capital and liquidity requirements). Due to new stress tests, some of European banks are seen to be in bad shape.
Anyhow, Basel III is not yet finished. How banks are expected to change their lending or market making behaviour during the end of this decade? Is it possible to estimate, what sectors are going to get hurt?
Interesting question. Indeed, Basel/I,II,III-type regulation changes the behavior of banks, that´s probably the goal of said regulation.
Its possible that their market behavior with respect to "notes" (which notes?) has changed.
bason on the typical Modigiliani/Miller intuition, it seems that there is no reason why Basel/type regulation will affect a sector or another. The main effects are in changing how firms get financed. If banks are expected to hold senior debt, then firms are more likely to issue senior debt. This changes how funds are intermediated from savers to investors, but in principle it should not change which sectors are financed. It should only affect how they are financed, with equity, preferred, junior debt, senior debt, senior collateralized debt, etc.
