"[Banking on Basel] is thorough, erudite, and well written. It will become a classic on this important topic of international bank regulation."
Robert Litan, Kauffman Foundation
"...it can be read and appreciated by the non-economist who wants to understand how global efforts to keep up with speculative bank maneuvers failed as dismally as domestic regulation did, and what should be done now."
"...provides a timely, careful and sharply critical account of a pivotal international financial regulatory regime.... Turullo's comprehensive account of Basel II is surprisingly clear and penetrating given the staggering complexity of the new accord and is essential reading for anyone interested in international financial regulation."
The American Journal of International Law
Banking on Basel: The Future of International Financial Regulation
by Daniel K. Tarullo
256 pp. ISBN Paper 978-0-88132-423-5 $21.56
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The turmoil in financial markets that resulted from the 2007 subprime mortgage
crisis in the United States indicates the need to dramatically transform regulation
and supervision of financial institutions. Would these institutions have been
sounder if the 2004 Revised Framework on International Convergence of Capital
Measurement and Capital Standards (Basel II accord)—negotiated between 1999
and 2004—had already been fully implemented? Basel II represents a dramatic
change in capital regulation of large banks in the countries represented on the Basel
Committee on Banking Supervision: Its internal ratings–based approaches to capital
regulation will allow large banks to use their own credit risk models to set minimum capital
requirements. The Basel Committee itself implicitly acknowledged in
spring 2008 that the revised framework would not have been adequate to contain
the risks exposed by the subprime crisis and needed strengthening. This crisis has
highlighted two more basic questions about Basel II: One, is the method of capital
regulation incorporated in the revised framework fundamentally misguided? Two,
even if the basic Basel II approach has promise as a paradigm for domestic regulation,
is the effort at extensive international harmonization of capital rules and supervisory
practice useful and appropriate? This book provides the answers. It
evaluates Basel II as a bank regulatory paradigm and as an international arrangement,
considers some possible alternatives, and recommends significant changes in
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2. Role of Capital Regulation [pdf]
3. Basel I
4. Negotiating Basel II
5. Assessing Basel II as Regulatory Model [pdf]
6. Basel II as an International Arrangement
7. Alternatives to Basel II
8. Conclusions and Recommendations [pdf]