Abstract
As is amply demonstrated in the ongoing financial turmoil, banking (depository and similar types of institutions) crises have proven costly throughout the world. As a result, the major objective of public policy with respect to banking now is to protect against the adverse externalities from large or multiple bank failures without at the same time reducing efficiency in the banking and financial systems. Inefficient or unlucky banks should be permitted to exit, but at little if any societal loss. As crossborder barriers to the flow of financial capital have been reduced in recent years, public policy to minimize the adverse externalities of, in particular, large bank failures has added an important international component. This was reflected in the wide-spread international adoption of the minimum regulatory risk-based capital ratio requirements developed by the Basel Committee of Banking Supervision, known first as “Basel I” and then in revised form as “Basel II.”
This chapter was initially prepared for presentation at a “Symposium on the U.S. Implementation of Basel II,” jointly sponsored by the FDIC and Journal of Financial Services Research in Washington, D.C., on September 13, 2006, and circulated as a working paper dated July 10, 2007. I am thankful to Edward Kane, participants at the symposium, and readers of the earlier working paper for helpful comments. The views presented are solely those of the author and do not necessarily represent those of the Federal Reserve Board or the Federal Reserve Bank of Chicago.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bair, Sheila C, 2009. “Statement Before the Committee on Bank, Housing and Urban Affairs,” U.S. Senate, Washington, D.C.: FDIC, August 4.
Bliss, Robert R., and George G. Kaufman, 2007. “U.S. Corporate and Bank Insolvency Regimes: A Comparison and Evaluation.” Virginia Law and Business Review (Spring): 143–77.
Basel Committee on Banking Supervision, 2005. Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework, Basel, November.
Kaufman, George G., 2004. “Basel II: The Roar That Moused,” in Benton E. Gup, ed., The New Basel Capital Accord. New York: Thomson, pp. 38–52.
Kaufman, George G., 2005. “Basel II vs. Prompt Corrective Action: Which is Best for Public Policy?” Financial Markets, Institutions, and Instruments (December): pp. 349–58.
Kaufman, George G., 2006. “Using Efficient Bank Insolvency Resolution to Solve the Deposit Insurance Problem.” Journal of Banking Regulation (October): 40–50.
Kaufman, George G., 2010. “The Financial Turmoil of 2007–09: Sinners and Their Sins.” Policy Brief 2010-PB-01, Networks Financial Institution at Indiana State University, March.
Kaufman, George G., and Steven Seelig, 2002. “Post-Resolution Treatment of Depositors at Failed Banks.” Economic Perspectives (Federal Reserve Bank of Chicago), 2nd Quarter, pp. 27–41.
Powell, Donald E., 2005. “Testimony: Development of the New Basel Capital Accords Before the Senate Committee on Banking, Housing and Urban Affairs.” Washington, D.C.: FDIC, November 10.
U.S. Government Accountability Office (GAO), 2009. Financial Markets Regulation: Financial Crisis Highlights Need to Improve Oversight of Leverage at Financial Institutions and across System (09–739), July.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2010 Robert R. Bliss and George G. Kaufman
About this chapter
Cite this chapter
Kaufman, G.G. (2010). Basel II Has Been a Costly Distraction on the Road to Minimizing the Societal Cost of Bank Failures and Financial Crises. In: Bliss, R.R., Kaufman, G.G. (eds) Financial Institutions and Markets. Palgrave Macmillan, New York. https://doi.org/10.1057/9780230117365_6
Download citation
DOI: https://doi.org/10.1057/9780230117365_6
Publisher Name: Palgrave Macmillan, New York
Print ISBN: 978-1-349-29113-7
Online ISBN: 978-0-230-11736-5
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)