Bad Regulation: Basel 1 and Basel 2

Imad A. Moosa
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Imad A. Moosa: Royal Melbourne Institute of Technology (RMIT)

Chapter 6 in Good Regulation, Bad Regulation, 2015, pp 98-120 from Palgrave Macmillan

Abstract: Abstract In 1988, the Basel Committee on Banking Supervision (BCBS or the Committee) established an international standard for measuring capital adequacy for banks, which came to be known as the Basel 1 Accord (also known as the 1988 Accord). One motive for establishing this framework, which is described in detail in BCBS (1988), was to bring consistency to the way banks were regulated in different countries. According to the BCBS, Basel 1 had two basic objectives: (i) to establish a more level playing field for international competition among banks; and (ii) to reduce the probability that such competition would lead to the bidding down of capital ratios to extremely low levels. We will find out that the establishment of an international level playing field is not a good idea and that the very international characteristic of the accord makes objective (ii) unachievable.

Keywords: Credit Risk; Internal Model; Operational Risk; Global Financial Crisis; Regulatory Capital (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-44710-4_6

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DOI: 10.1057/9781137447104_6

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