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Reforming the International Financial System for Development$
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Jomo Kwame Sundaram

Print publication date: 2011

Print ISBN-13: 9780231157643

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231157643.001.0001

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The Basel 2 Agenda for 2009

The Basel 2 Agenda for 2009

Progress so far

Chapter:
(p.169) 7 The Basel 2 Agenda for 2009
Source:
Reforming the International Financial System for Development
Author(s):

Andrew Cornford

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231157643.003.0007

This chapter examines the ongoing revisions to Basel 2, the international standards for banks' regulatory capital developed by the Basel Committee on Banking Supervision (BCBS) to replace the 1988 Basel Capital Accord (Basel 1), and their implications for developing countries. The 2006 text of Basel 2 had been considered closed before the credit crisis which began in mid-2007. This crisis has indicated major shortcomings in the regulatory framework for financial institutions which are now the subject of an agenda of wide-ranging reform. Strengthening Basel 2 is an important item on this reform agenda. This chapter considers two of the major subjects of the revisions of Basel 2: the rules for securitization exposures and the Market Risk Framework. It argues that the Basel 2 rules may engender new problems in the future, citing the possibility that banks may be exposed to risks associated with cross-border asset-backed investments as well as investments linked to operations in their own financial markets.

Keywords:   banking international standards, Basel 2, Basel Committee on Banking Supervision, developing countries, credit crisis, financial institutions, securitization, Market Risk Framework, asset-backed investments, financial markets

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