The global financial crisis has led to arange of reform proposals concerning the regulatoryframework governing the banking sector collectively referredto as 'Basel III.' Although the proposed reformsare expected to generate substantial benefits by reducingthe frequency and intensity of banking crises, concerns havebeen raised that, in the short term, the costs of moving tohigher capital ratios may lead banks to raise their lendingrates and reduce lending. This note explores the near-termimplications of Basel III capital regulations on bank flowsto emerging markets, based on an analysis of the keydeterminants of these flows.