The Basel Process

732 Words2 Pages

What is the net contribution of the Basel Process to the governance of global finance? The goal of this paper is to describe, analyze, and evaluate the costs and benefits of the Basel Capital Adequacy Accords through the comparison of intended consequences, namely the stability of the global banking system, and unintended consequences, namely financial risks.
“Basel Process” refers to the governing attempts of the Bank for International Settlements (BIS) in the global financial system, as well as the collective efforts that finance ministries, central banks, and regulators of different countries made towards the common goal of achieving global financial stability. The term is also used to refer to the policy-making process through which …show more content…

At the time, international Capital flows were increasingly disorderly, due to being often unregulated. Helleiner (2014) argues that the Basel Committee on Banking Supervision (BCBS) created the 1988 Basel Accord to establish “a common minimum capital adequacy standard for international for the first time” (p. 94). It reflected the increasingly market-friendly thinking present at the time. The 2004 Basel Accord later reinforced this “self-regulatory” approach by allowing large banks to “rely more on their own data and internal models in determining the amount of capital to put aside for overall credit risk.” In 2010, the G20 countries created Basel III to increase the quantity and quality of capital required for banks and help buffer banks from times to times of market …show more content…

Not all negotiations or discussions involved every nation affected by the newly proposed regulations. After regulations were passed through the Basel Process, they were up to each national regulator to apply with their own adjustments. This, understandably, led to the misapplications, with or without intention, in different markets.
On the one hand, the Basel Accords have contributed greatly to the stability of the international banking system, with remarkable results. On the other hand, unfortunately, though predictably, they have also given different actors in the financing market the incentive and means to evade regulations. These behaviors have led to a new set of financial risks in the markets.
Global Financial

More about The Basel Process

Open Document