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The Basel II Reform That Would Have Made Most Injections of Public Funds Unnecessary
The financial crisis has put great pressure on banks and led to a number of emergency measures intended to restore confidence in the banking system: tentative changes to accounting standards, recapitalisation of the banking industry, and higher capital requirements.
Author(s) :
Professor of Finance and Director of the EDHEC Risk and Asset Management Research Centre
Applied Research Manager at the EDHEC Risk and Asset Management Research Centre
Presentation :
Each measure targets a specific concern that has arisen during the crisis. Governments and regulators, however, have yet to deal with one of the essential causes of systemic risk: the inflexibility of prudential regulation for banking. As it happens, a single minor change would make it possible to restore much of the confidence in the banking sector without requiring any capital injections in the short term: acknowledging that banking capital ratios fall during downturns would have made most of the injections of public funds unnecessary. Making this change today would give governments far more room to support the real economy.| Type : | Position paper |
|---|---|
| Date : | le 15/01/2009 |
| Research Cluster : | Finance |
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About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 20 business schools. Fully international and directly connected to the business world, EDHEC is a school for business, rather than a business school, where excellence in teaching and research focuses on innovation to stimulate entrepreneurship and creativity. For business from birth and dedicated to business, EDHEC makes entrepreneurs for life, able to remodel or create successful businesses wherever they work.
EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching philosophy, inspired by its award-winning research activities, focuses on “learning by doing”.
