Regulatory omissions - the paradox of an oversight body
Note: this blog post was also published at the Adam Smith Institute blog titled: "The paradox of regulation" Apart from the policymakers in the EU summit, the regulators across Europe are designing their reform proposals on how to improve the financial system and make it more robust to future crises. One of the main proposals on banking regulations in Europe is done by the Basel Committee on Banking Supervision . In addition to Basel I and Basel II, the previous banking reforms that substantially influenced the changes in banking regulation worldwide (I briefly touch upon the Basel Accords in my paper on the crisis ) the new proposal, Basel III goes a step further. It is seen as a comprehensive response of the Basel Committee to the financial crisis of 2007-2009. The Basel III agenda is based around three key elements aimed at making banks more resilient to future instabilities. Banks need to have core tier one capital equal to 7% of their risk-weighted assets; top “s