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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 the arrangement.
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Paperback
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Discovery Miles 3 660
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