A conceptual framework for the Basel accords-based regulation
| Pages | 90-103 |
| Published date | 08 February 2016 |
| Date | 08 February 2016 |
| DOI | https://doi.org/10.1108/JFRC-02-2015-0007 |
| Author | Jaffar Mohammed Ahmed |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
A conceptual framework for the
Basel accords-based regulation
Jaffar Mohammed Ahmed
JMA Training and Consulting, Manama, Kingdom of Bahrain
Abstract
Purpose – The purpose of this paper is to describe a theoretical model for banking regulation in
relation to Basel accords implementation. As a risk manager practitioner at a nancial institution and
in-charge of Basel implementation in a Basel accords environment of banking regulation, the author has
been intrigued by the theoretical basis of the design of Basel accords. The objective was to investigate
a theoretical model in the literature according to which the accords were designed. In case of deciency
in the literature of this model, the author seeks to provide a juxtaposition to the theoretical model that
explains the accords adoption and implementation by regulators.
Design/methodology/approach – This paper presents a review of existing literature.
Findings – After reviewing of public interest theory, cultural theory, administration theory and the
new-institutionalism theory, the author found little application of these theories to the capital-based
regulation, particularly in relation to Basel 2 accord. There is deciency in the literature of a conceptual
theoretical framework based on which the author can explain the adoption of Basel accords. The author
has provided a theoretical model that links these theories to the practice of banking regulation. This
paper found deciencies in theories of how banks should be regulated as compared to several theories
that explains why banks are regulated.
Originality/value – After reviewing of public interest theory, cultural theory, administration theory
and the new-institutionalism theory, the author found little application of these theories to the
capital-based regulation, particularly in relation to Basel 2 accord. There is deciency in the literature of
a conceptual theoretical framework based on which the author can explain the adoption of Basel
accords. The author has provided a theoretical model that links these theories to the practice of banking
regulation. This paper found deciencies in theories of how banks should be regulated as compared to
several theories that explains why banks are regulated.
Keywords Conceptual framework, Banking regulation, Basel 2
Paper type Viewpoint
1. Introduction
The purpose of this paper is to describe a theoretical model for banking regulation in
relation to the Basel accords implementation. As a risk manager at a nancial institution
and incharge of Basel implementation in a Basel accords environment of banking
regulation, I have been intrigued by the theoretical basis of the design of the Basel
accords. The objective was to investigate a theoretical model in the literature according
to which the accords were designed. I juxtapose with a theoretical model that explains
the accords adoption and implementation by regulators in light of the deciency of this
model. The paper is split into two parts. The rst part discusses theories of regulation
via three sections. Section 2.1 discusses the “positive economics” theories of regulation,
which addresses why and how banks are regulated. Section 2.2 addresses the
“normative economics” theories of regulation, which address how and why banks
should be regulated. In Section 2.3, I discuss the neo-institutionalism theory. Section 2.4
The current issue and full text archive of this journal is available on Emerald Insight at:
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JFRC
24,1
90
Journalof Financial Regulation
andCompliance
Vol.24 No. 1, 2016
pp.90-103
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-02-2015-0007
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