Basel II just keeps digging the hole of Basel I
Sir, Charles Freeland a Former Deputy Secretary-General of the Basel Committee on Banking Supervision considers “Basel II a big improvement on outdated model” February 7, and the outdated model he refers to is Basel I which has been in place for only about ten years.
I do not think it of Basel II as an improvement but jut as a further digging ourselves into a very dangerous hole. Now, instead of going back to the freedom of the markets, besides keeping on using the outsourced bureaucrats of the credit rating agencies to measure risk (Basel I) we are with Basel II also allowing some big banks to do their own internal risk modelling, and this even when we have recently witnessed how much intrinsic risk these models create by themselves and how bad they can really be. This is all plain crazy!
I would much prefer setting an 8 percent minimum capital requirement on all the credits (including those to the public sector) and assist the market producing the information it needs to take it from there.
And, just to make certain we do not put all the eggs in the same basket, I would start thinking about a progressive tax on the size of the banks. “The bigger you are the more it will hurt if you fall on me and so the higher must the insurance premium I charge you be”
I do not think it of Basel II as an improvement but jut as a further digging ourselves into a very dangerous hole. Now, instead of going back to the freedom of the markets, besides keeping on using the outsourced bureaucrats of the credit rating agencies to measure risk (Basel I) we are with Basel II also allowing some big banks to do their own internal risk modelling, and this even when we have recently witnessed how much intrinsic risk these models create by themselves and how bad they can really be. This is all plain crazy!
I would much prefer setting an 8 percent minimum capital requirement on all the credits (including those to the public sector) and assist the market producing the information it needs to take it from there.
And, just to make certain we do not put all the eggs in the same basket, I would start thinking about a progressive tax on the size of the banks. “The bigger you are the more it will hurt if you fall on me and so the higher must the insurance premium I charge you be”
Posts
