During the global financial crisis, people in the United States, Ireland, Iceland, and many other countries learned that undercapitalized banks can spell trouble for the whole economy. The Basel II rules that were supposed to prevent widespread bank failures proved inadequate. In response to the crisis, the world’s central bankers and bank regulators started work on a new set of rules, Basel III, that they have promised will make us safer.
Now Basel III has reached the crucial phase of writing the technical
rules to implement the agreed principles. Many observers are worried
that each round of rule-making will provide an opportunity for watering
down the regulations until what is left is no more effective than Basel
II was. This post looks at one key aspect of the new rules, the
regulation of bank capital, as an illustration of the broader
difficulties facing the effort to regulate banking risk more
effectively. >>>Read more
If you liked this post, be sure to check out these related slideshows, both newly updated:
What is Basel III and Why Should we Regulate Bank Capital?
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