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Basel II as a casualty of the global financial crisis

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Abstract

The global financial crisis has reinforced the pre-existing belief in the weaknesses of the Basel II Accord. It is argued that capital-based regulation and the Basel-style capital regulation cannot deal with financial crises and that attention should be paid to liquidity and leverage. The Accord is criticised, in view of what happened during the crisis, for allowing the use of bank internal models to determine capital charges, for boosting procyclicality of the banking industry, for reliance on rating agencies and for being an exclusionary, discriminatory and a one-size-fits-all approach. It may not be possible to salvage Basel II, and the way forward is perhaps to abandon the idea of unified international financial regulation.

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  1. Department of Accounting and Finance, Monash Unversity, Caulfield East, 3145, Victoria, Australia

    Imad A Moosa

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Moosa, I. Basel II as a casualty of the global financial crisis. J Bank Regul 11, 95–114 (2010). https://doi.org/10.1057/jbr.2010.2

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