Banking Regulation Basel II

Paper Summary:

This paper explains that Basel II is recommendations and regulations issued by the Basel Committee on Banking Supervision as an attempt to create a more stable banking environment, to limit the risk of default and to create a common global risk management framework. The paper explains its three-pillar approach to better manage risk and to increase disclosures and then describes potential problems created by the Basel II framework in its implementation in developing countries. The paper then relates that, these developing countries are still anxious to apply Basel II because a stable banking sector could be successfully expanded to a stable and healthy economy.

From the Paper:

"For developing countries, such a situation poses potential significant threats. First of all, during recessions, it would make it much harder for developing countries to raise capital and thus can lead to the crisis going on indefinitely, rather than the capacity of the developing country to raise funds helping end the recession. Further more, even in normal economic growth phases, for developing countries, with a growing economy based very much on the existence of credit, a stifled credit policy can prove an important potential problem."

Sample of Sources Used:

• Basel Committee on Banking Supervision. June 2006. Bank for International Settlements. On the Internet at http://www.bis.org/publ/bcbs128.pdf. Last retrieved on September 5, 2007
• Carstens, Agustin. June 2, 2004. Opportunities for Emerging and Developing Countries in International Standard Setting: An IMF Perspective. Fourth Annual IMF/World Bank/Federal Reserve Seminar. On the Internet at http://www.imf.org/external/np/speeches/2004/060204a.htm. Last retrieved on September 5, 2007
• Bailey, Robert. 2005. Basel II and Development Countries: Understanding the Implications. Development Studies Institute. No. 05-71. On the Internet at http://www.lse.ac.uk/collections/DESTIN/pdf/WP71.pdf. Last retrieved on September 5, 2007
• Tonveronachi, M. February 2007. Implications of Basel II for the financial stability of developing countries. On the Internet at http://www.ibase.br/userimages/FLGG%20-%20Mario%20Tonveronachi.pdf. Last retrieved on September 5, 2007
• What is Basel II? Bank Track. On the Internet at http://www.banktrack.org/doc/File/banktrack%20publications/banktrack%20fact%20sheets/What%20is%20basel%20II.pdf. Last retrieved on September 5, 2007

More papers on Banking Regulation Basel II:

• Research Paper # 106554 : "Basel II Banking Supervision"
• Research Paper # 47424 : "Basel Capital Accord II"
• Dissertation or Thesis # 116566 : "Interest Rate Risk Management"

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