Introduction to 'Basel III and Beyond'
The Big Financial Crisis
The Policy Response: From the G20 Requests to the FSB Roadmap; Working Towards the Proposals of the Basel Committee
The New Definition of Regulatory Capital
A New Framework for the Trading Book
Counterparty Credit Risk and Other Risk-Coverage Measures
Tools for Mitigating the Procyclicality of Financial Regulation
The Regulatory Leverage Ratio
The New Framework for Liquidity Risk
The Discipline of Credit Rating Agencies
Systemically Important Banks
Regulating Remuneration Schemes in Banking
Crisis Management and Resolution
The Impact of the New Regulatory Framework
A Brazilian Perspective on Basel III
A New Institutional Framework for Financial Regulation and Supervision
Structural Regulation Redux: The Volcker Rule
The Changing Uses of Contingent Capital under the Basel III Framework
This article was first published as a chapter in Basel III and Beyond on July 27, 2011, by Risk Books.
“My voice may sound to you harsh, and I may too severely insist on proclaiming the necessity of virtue and sacrifice; but I know, and you too – untainted by false doctrine, and unspoiled by wealth – will soon know also, that the sole origin of every Right is in a Duty fulfilled.”
Giuseppe Mazzini (1860)
The financial crisis erupted in 2007 in the US subprime mortgage market – a relatively small business segment of the global financial system – galvanised into existence an unprecedented period of financial instability in the international markets and the most severe economic recession since the Great Depression of the 1930s. After much debate, a consensus regarding the origins of the crisis has emerged. The list of factors is long, ranging from long-lasting macroeconomic imbalances to microeconomic failures.
Financial regulation, or the lack thereof, must also take responsibility. Prudential and accounting rules did not adequately mitigate excessive risk-taking. In some cases, they in fact provided bankers with wrong incentive structures, fostering weak lending standards