Chapter

Basle Accord on Capital Adequacy

Dale D. Murphy

in The Structure of Regulatory Competition

Published in print September 2006 | ISBN: 9780199216512
Published online March 2012 | e-ISBN: 9780191696008 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199216512.003.0005

Series: International Economic Law Series

Basle Accord on Capital Adequacy

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In December 1987, central banks from the world's major industrial powers reached agreement to require private banks to raise capital (as a percentage of risk-weighted loans). Implementation of this Basle Accord showed some movement toward a higher common denominator outcome but also some continuing heterogeneity between countries. This chapter first provides an overview of the ‘puzzle’ posed by the Basle Accord. It then summarizes the industrial structure and asset specificity of international finance (including contracting structures on sovereign lending). The case study in Section Four examines heterogeneous movements in the regulation of capital prior to the Basle Accord, and the impact of the 1980s debt crisis on them. Section Five discusses the largely failed multilateral efforts toward regulatory homogeneity through the Cooke Committee. Section Six, on bilateral US-UK agreement, denotes the point at which real movement toward the Basle Accord occurred. That movement was cemented when the USA persuaded Japan to join, as discussed in Section Seven. Section Eight discusses the final negotiation and implementation of the Accord. Section Nine explains that considerable heterogeneity remained in the use of capital requirements worldwide and that new heterogeneous measures were taken in the early 1990s. The final section reviews the case.

Keywords: Basle Accord; higher common denominator; bank regulation; capital; international finance

Chapter.  15991 words.  Illustrated.

Subjects: Public International Law

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