Why it is time to kill the Basel illusion

摘要

In July 2013, the US Federal Reserve finalised its rules for the implementation of Basel III capital requirements for US banks. This announcement came about six years after the Fed had approved rules for the implementation of the Basel II framework. Let us note that during this six-year interval, not a single major US commercial bank had adopted Basel II.Furthermore, the major US bank regulators recently proposed to double the simple leverage rule under Basel III, which requires tangible common equity equal to 3% of total assets, for the largest US banks. The simple leverage rule, as well as the US regulators' most recent proposal in this regard, reflects the high degree of confusion and ambivalence that exists regarding the Basel framework. And rightly so, as the Basel system has become an albatross around the neck of the banking system and its regulators.