Ojo, Marianne (2011): Great expectations, predictable outcomes and the G20's response to the recent global financial crisis.
Download (130kB) | Preview
The meeting of the Governors and Heads of Supervision on the 12 September 2010, their decisions in relation to the new capital framework known as Basel III, as well as the endorsement of the agreements reached on the 26 July 2010, once again, reflect the typical situation where great expectations with rather unequivocal, and in a sense, disappointing results are delivered. The outcome of various consultations by the Basel Committee on Banking Supervision, consultations which culminated in the present Basel III framework, also reflect the focus on measures aimed at addressing problems attributed to Basel II, that is, measures aimed at mitigating pro cyclicality. This is rather astonishing given one critical lesson which has been drawn from the recent Financial Crisis: namely, that capital measures on their own, were and are insufficient in addressing and averting the Financial Crisis. Furthermore, banks which have been complying with capital adequacy requirements could still face severe liquidity problems.
As well as an increase of the minimum common equity requirement from 2% to 4.5%, the recent agreement and decisions of the Governors and Heads of Supervision also include the stipulation that banks hold a capital conservation buffer of 2.5% - hence consolidating the stronger definition of capital (as agreed in the previous meeting held by the Governors and Heads of Supervision earlier in July 2010).
|Item Type:||MPRA Paper|
|Original Title:||Great expectations, predictable outcomes and the G20's response to the recent global financial crisis|
|Keywords:||pro cyclicality; liquidity; capital; Basel III; countercyclical; forward looking provisioning; financial regulation; financial crises|
|Subjects:||K - Law and Economics > K2 - Regulation and Business Law
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
G - Financial Economics > G0 - General > G01 - Financial Crises
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles
|Depositing User:||Dr Marianne Ojo|
|Date Deposited:||14. Feb 2011 01:10|
|Last Modified:||21. Feb 2013 19:38|
Accompanying Document to the Proposal for a Directive of the European Parliament and of the Council amending Capital Requirements Directive on trading book, securitisation issues and remuneration policies. < http://ec.europa.eu/internal_market/bank/docs/regcapital/com2009/impact_assesment_en.pdf >
Basel Committee on Banking Supervision, “An Assessment of the Long Term Economic Impact of Stronger Capital and Liquidity Requirements” Bank for International Settlements Publications August 2010 http://www.bis.org/publ/bcbs173.pdf?noframes=1
Basel Committee on Banking Supervision, „ Consultative Document: Counter cyclical Capital Buffer Proposal“ July 2010 http://www.bis.org/publ/bcbs172.pdf?noframes=1
Basel Committee on Banking Supervision, “Principles for Sound Liquidity Risk Management and Supervision” September 2008 http://www.bis.org/publ/bcbs144.htm
Borio C, “Implementing a Macro Prudential Framework : Blending Boldness and Realism” Bank for International Settlements Publications http://www.bis.org/repofficepubl/hkimr201007.12c.pdf?noframes=1
Brunnermeier M, Crockett A, Goodhart C, Persaud A and Shin H, “The Fundamental Principles of Financial Regulation”, ICMB-CEPR Geneva Reports on the World Economy, 11, 2009.
Chan Lau J, „Regulatory Capital Charges for Too-Connected-to-Fail Institutions: A Practical Proposal” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1566443
Cifuentes R, Ferrucci G and Shin HS, “Liquidity Risk and Contagion” (2005) Journal of the European Economic Association Volume 3 at pages 556-566 http://www.bri.org/bcbs/events/rtf04shin.pdf
Committee of European Banking Supervisors, “Position Paper on a Counter Cyclical Capital Buffer” July 2009 <http://www.c-ebs.org/getdoc/715bc0f9-7af9-47d9-98a8-778a4d20a880/CEBS-position-paper-on-a-countercyclical-capital-b.aspx>
DLA Piper, The Turner Review :Key Elements of the Turner Review, DLA Piper Publications <http://www.dlapiper.com>
European Central Bank, “Is Basel II Pro Cyclical? A Selected Review of the Literature” Financial Stability Review, European Central Bank Publications December 2009
European Central Bank, “The Concept of Systemic Risk” Financial Stability Review December 2009 http://www.ecb.int/pub/fsr/shared/pdf/ivbfinancialstabilityreview200912en.pdf?a3fef6891f874a3bd40cd00aef38c64f
Financial Stability Forum, “Report of the Financial Stability Forum on “Addressing Pro cyclicality in the Financial System: Measuring and Funding Liquidity Risk” April 2009 http://www.financialstabilityboard.org/publications/r_0904a.pdf
Goodhart, Hofmann and Segoviano , “Bank Regulation and Macroeconomic Fluctuations” (2004) Oxford Review of Economic Policy, vol. 20,no. 4.
Hannoun H, „Towards a Global Financial Stability Framework“ Bank for International Settlements Publications February 2010 < http://www.bis.org/speeches/sp100303.pdf
Jimenez and Saurina , “Credit Cycles, Credit Risk, and Prudential Regulation” (2006) International Journal of Central Banking, vol.2, no.2.
Kashyap A, Stein J and Rajan R, “Rethinking Capital Regulation”, Jackson Hole Conference Paper, 2008.
Laeven L and Majnoni G, “ Loan Loss Provisioning and Economic Slowdown: Too Much Too Late?” (2003) Journal of Financial Intermediation Journal of Financial Intermediation (12) 178–197
Repullo R, Saurina J, and Trucharte C, “How to Mitigate the Pro cyclical Effects of Capital Adequacy Rules” <http://www.eurointelligence.com/article.581+M5ff0e4ba595.0.html>