You are here: Home Knowledge Base Economy Balancing Risk Taking and Financial Regulation Solutions Create an internationally harmonized and countercyclical set of capital requirements for financial institutions.
Symposium 2009

Solution for Balancing Risk Taking and Financial Regulation

The Challenge

Many observers blame excessive risk taking and inadequate regulation as the core causes of the current global financial crisis that we have been witnessing.

Many observers blame excessive risk taking and inadequate regulation as the core causes of the current global financial crisis that we have been witnessing.

Create an internationally harmonized and countercyclical set of capital requirements for financial institutions.

The current crisis has made it clear that current regulatory frameworks are driven by domestic priorities and are weak when it comes to resolving crossborder banking crises.

International banks and financial institutions should be asked to meet the same simple and clear principles and ratios in their liquidity and capital provisions. Convergence of capital measurement and capital standards would be a decisive step in filling regulatory loopholes and reducing inefficiency, arbitrage and distortions in the competitive field.

An important part of this deal would be international agreement on the range of assets defined as being liquid. This global standard would support the financial system in terms of transparency and risk management.

Basel II pro-cyclical effects should be tackled with dynamic capital requirements:
raising prudential reserves and restraining greater risk-taking during a boom period, and loosening some ratios.

    Implemen- tations

    Implementation
    Symposium 2009

    Negotiations Basel III

    Polity, Academia, Business, Civil Society

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