Was Basel II really faulty?

AuthorHensher, Shirley
PositionLetters - Letter to the editor

As a risk management professional in retail banking, I was drawn to your feature "The global financial crisis: what went wrong?" (July/August). It made some interesting assertions, many of which I support, but I must challenge its statement that the Basel II capital adequacy regime was somehow to blame.

The Basel II regime hadn't come into full effect in Europe in 2007 when the crisis was starting, and the US was two years behind. It represents an attempt to address the limitations of Basel I, which did encourage regulatory arbitrage through the application of crude risk weightings that were largely unrelated to underlying asset quality. Ever...

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