Basel Ⅲ in Reality

Basel Ⅲ in Reality

Financial regulation has shifted from a system as an oligopoly dominated by the G2/G5 to expanded clubs like the Basel Committee for Banking Supervision. Expansive clubs have to agree to terms that are closer to the preferences of soft-regulation members. Yet, once a global agreement on minimum standards, such as Basel 3, is reached, the task is left to national or regional regulators. Deviations from the Basel 3 standards are bound to occur; the complexity of the agreement will facilitate an asymmetric implementation of national regulation and supervision. Countries like Australia, Canada, the United Kingdom, the United States, and some Scandinavian countries have chosen higher standards. On the other hand, we should expect deviations to take place in member countries of the Eurozone that are heterogeneous having different preferences and trade-off between regulatory stringency and economic activity. The requirements of both global clubs and regional club regarding transparency, monitoring, and a level playing field will also cause a collision. This paper reports examples of heterogenous applications of supervisions and reforms.