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By: GeorgeLekatis Fri, 27 May 2011 18:37:23 +0000 We cannot just be negative.

There is no way to zero risk in banking, this is for sure. Basel iii is not perfect, but it is better than Basel ii.

The framework improves consistency and establishes risk management principles that are unique.

Yes, we will have another crisis in the future, this is also for sure. It is simple: Passing laws against robbery and murder has not stopped people from robbing and murdering.

To ban or not to ban taking risks? More strict banking rules can destroy the economy. Banks will not be willing to lend. What is next? Unemployment, bankruptcies, no mortgages…

Banks are (and must be) in the business of taking risks. Sometimes governments force banks to lend to at-risk borrowers, and decisions are based on government intervention, not risk management. Is there a framework against that? Can we blame Basel iii?

We can increase the likelihood that banks can absorb losses under certain circumstances. This is all we can do.

George Lekatis

By: PerKurowski Mon, 09 May 2011 02:12:41 +0000 Basel I, II and III are progressively rotten at their core… and should not be defended.

First, because there has never ever been a financial crisis that has resulted from excessive lending or investments in what was perceived as risky, they have ALL resulted either from fraudulent behavior or excessive lending investments in what was perceived as not risky… and so that capital requirements for banks that are set higher when the official risk perceived by the official risk perceivers, the credit rating agencies, is high, and lower when the risk is perceived to be lower, are simply put, nonsensical.

Second, because there is absolutely nothing that says that the banks are there to be useless mattresses where to stash away some cash, but there to perform the important societal function of channeling bank credit to those who do not have access to capital markets.

Third, because the regulators gave up their role as regulators and arrogantly took upon themselves, by setting their risk-weights, to be the risk-managers of the world and, as a direct consequence, the banks went and drowned themselves in sovereigns and triple-As.

And the worst is seemingly that this Basel Committee is not accountable to anyone!

Per Kurowski
A former Executive Director at the World Bank (2002-2004)

By: rcwhalen Tue, 14 Sep 2010 12:16:11 +0000 I put out this statement yesterday:

“Basel III is entirely irrelevant to the economic situation and even to the banks. Through things like minimum capital levels, the Basel II rules provided the illusion of intelligent design in the regulation of banking and finance. In fact, Basel II made the subprime crisis possible and the subsequent bailout inevitable. Now Basel III is being criticized as hurting the economic recovery. In fact, Basel III is a sideshow and is dwarfed in terms of its economic impact by changes in accounting rules and securities laws in the U.S. and EU. The only people who care about Basel III are the economists and regulators who are employed to support this ridiculous process.”

I would add to Felix’s comment is that the key thing about Basel II was the way in which the banks responded, namely with off-balance-sheet activities. The actually footprint in the marketplace of a bank includes its OBS emissions. Thus I contend that the changes in accounting rules in the EU and US are far more weighty in terms of changing bank behavior.


By: Uncle_Billy Tue, 14 Sep 2010 09:46:28 +0000 You really need to have a chat with Per Kurowski over at the Basel-ine Scenario.

By: acclaw Tue, 14 Sep 2010 08:33:18 +0000 Felix, there is an ironic thing in the last paragraph. The disastrous SEC decision you refer to in the paragraph actually permitted the banks to implement Basel II. And whichever way you look at it, the core of Basel II with its catastrophic over-reliance on cra ratings in foundations approach and securitization framework and failed risk management ontologies in e.g. IRBA has not disappeared.

Of course, it is going to be different this time, right.