Prophets in their own time

Should the US regulators junk their Basel II framework-with its eight core banks and aspirant advanced firms? There are rumours that they are looking to ditch the anomalous framework created to satisfy domestic political pressures because, well, it no longer satisfies those pressures. My sources tell me that the results of QIS4 shook up many in the US, and has resulted in a rethink on how the country is going to implement Basel II.

I think that if the US decided to implement Basel II in the same way as the rest of the world, well, that would be just grand. Certainly, I think a lot of financial institutions would breathe a sigh of relief to know that the playing field internationally was suddenly more level. And domestically, small and medium-size banks might actually benefit from a 'real' approach to Basel II instead of the half-measures previously proposed.

But I also think it would be long overdue recognition of the thought leadership and hard work that US regulators have put into developing Basel II within the Basel Committee on Banking Supervision. Dragged before Congress repeatedly and criticised by the industry, US regulators have had more than their fair share of domestic battles to fight. It would be an achievement if the powers-that-be in the US could reconcile themselves to the idea that Basel II might actually make sense, and should be implemented. Period.