Banking on Basel: the future of international financial regulation

Preface

Acknowledgments

1. Introduction

Summary of Argument

Outline of the Book

A Note on Timing

2. Role of Capital Regulation

Rationale for Capital Regulation

Evolving Role of Capital Regulation

Conclusion

3. Basel I

Origins of the Accord

Elements of the Accord

Assessment of Basel I

Conclusion

4. Negotiating Basel II

Launching the Review Process

Curious Release of the First Consultative Paper

Shift to an Internal Ratings-Based Approach

Process of Continuous Revision

Revised Framework

Responding to the Subprime Crisis

Conclusion

5. Assessing Basel II as a Regulatory Model

Do Regulatory Capital Requirements Matter?

Potential Benefits of the Advanced Internal Ratings-Based Model

Potential Negative Effects of the Advanced Internal Ratings-Based Model

Conclusion

Appendix 5A

6. Basel II as an International Arrangement

Safety and Soundness

Competitive Equality

Cooperative Supervision of Multinational Banks

Indirect Benefits

Conclusion

7. Alternatives to Basel II

Retaining a Standardized Approach

Market Discipline: Mandatory Subordinated Debt

Precommitment Approach

Establishing an International Supervisory Role

Eliminating International Cooperation on Safety and Soundness

Conclusion

8. Conclusions and Recommendations

Recommendations

Implications Beyond Capital Regulation

References

Index

Tables

Table 2.1. US bank capital ratios, 1970-81

Table 3.1. The world's 10 largest banks, 1974, 1981, and 1988

Table 3.2. Capital ratios of selected large banks, 1981 and 1988

Table 3.3. Credit conversion factors for off-balance-sheet items in Basel I

Table 3.4. Capital charges for debt instrument market risks in the Basel Committee 1993 proposal