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Published by:
IBS Research Center (2009)
Length:
12 pages
Data source:
Published sources

Abstract

The 2008 financial crisis, with its origins in the 'Sub-prime Mortgage Crisis' in the US, had impacted financial markets and economies worldwide. The inter-bank dealings of the US banks with banks across borders left the global banking industry in disarray. The effect of the sub-prime mortgage crisis on the US financial sector was much greater and graver. With the deficiencies in their respective regulatory frameworks exposed, the governments of several nations made attempts to limit the damage caused by the financial meltdown. Given the international character of the crisis, the required solutions would also have to be global. In this context, the call for a global regulatory banking authority gained momentum. The Basel Committee, which is a forum for central bankers of member nations, has been an advisory body for the banking industry since 1930. Currently, the implementation of prudential norms recommended by the Basel Committee is voluntary, as there is no legal authority for the Basel Committee to enforce the same. In fact, many member countries did not fully implement Basel II norms and strangely, the US is still following Basel I norms. In the wake of the 2008 financial crisis, there is a call to make the Basel Committee a regulatory authority. Can the Basel Committee emerge as one such authority not only for healing the wounds caused by the financial crisis, but also ensuring against occurrence of such an event in the future? What challenges lie ahead for the Basel Committee to evolve into an independent global banking regulatory authority?

Topics

Basel norms; Financial crisis; Regulation; Capital adequacy; Pillars; Basel Accord; Supervision; Banking supervisory control; Global regulatory authority; International co-operation; Mark-to-market accounting; Glass-Steagall Act; Gramm-Leach-Bliley Act
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Other setting(s):
July 2009

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