Final answer:
The Basel III accord requires banks to hold more capital if they have riskier assets to ensure solvency and stability in the financial system. It does not dictate lending to less developed countries, higher deposit insurance premiums, or a reduction in short-term loans.
Step-by-step explanation:
The Basel III accord requires banks to maintain higher levels of capital if they have riskier assets. This regulation is one of a number of measures introduced to ensure banks' solvency by avoiding excessive risk. The accord does not stipulate that banks must increase lending to less developed countries, pay higher premiums for deposit insurance, or reduce their short-term loans as a general requirement.
Bank regulation, including Basel III, involves reserve requirements, capital requirements, and restrictions on the types of investments banks may make. Banks can protect themselves from unexpected loan defaults by selling some loans in the secondary loan market, diversifying their loan portfolios, holding a greater proportion of their assets in bonds and reserves, and adhering to the capital and reserve requirements designed to protect depositors and maintain the stability of the financial system.