“The Basel rule-setting on capital requirements for banks has been a laborious process whose iterations have stretched over decades. By the time Basel II came out of gestation the biggest financial crisis in generations was about to strike. In just a few months, Basel III will begin to take effect – but as regulators prepare to enforce the latest version of the rules, controversy has erupted over their merit.
Andrew Haldane of the Bank of England lit the fuse of controversy at Jackson Hole this summer, by suggesting the risk-weighting approach at the heart of Basel III was too complex and should be left behind. The backlash from the regulatory community was predictable. Last week Wayne Byres, secretary-general of the Basel Committee, vigorously defended Basel III.”
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