Sunday, August 29, 2010

Basle I, Basle II, Basle III, making things worse

Global politics and complicated risk management formulas will collide in Switzerland next month as regulators from around the world try to reach an agreement on new banking rules aimed at preventing another financial crisis.
The stakes are so high that the leaders of the U.S., France, Germany and Japan have become involved, elevating what might otherwise be dismissed as a technocratic exercise. The outcome is bound to affect the profitability and structure of the world's largest banks, many of which have put decisions on hold until the new rules are in place.
Negotiators want to hammer out most of the details by a mid-September meeting in Basel, Switzerland, so they can deliver a package that the leaders of the Group of 20 largest industrialized nations can bless at a summit in South Korea in November..."
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Comment: No bailout, the immediate threat of bankruptcy for banks would be the best line of defense against excessive risk-taking. Yet the more the banking system has been nationalised, the more rules and regulations are necessary. The way to serfdom and inefficiency is paved with good bureaucratic intentions. The whole system has been put on the slippery slope, and there won't be any more halting soon.

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