Friday, August 31, 2012

Yes, Basel III has to be thrown out the window, in its entirety

Andrew Haldane, Bank of England's executive director for financial stability said in a speech during the 2012 Jackson Hole meetings, "less may be more" when it comes to financial regulation, and called for a "de-layering" of the Basel III accord to focus more on simpler gauges of bank stability. 

And he is absolutely right! By accepting to engage banks through complex regulations, the regulators have acted less as regulators and more as risk-managers… which does not make any sense, since a regulator’s prime responsibility is to prepare itself for when risk-management fails.

But there are of course many more reasons to throw Basel III, and the Basel Committee regulators too, out the window.