New Book on Bank Regulation
Congratulations to adjunct scholar Jim Barth for his new book, Rethinking Bank Regulation: Till Angels Govern (with Gerard Caprio Jr. and Ross Levine), just published by Cambridge University Press. From the dust jacked (quoting Frederic Mishkin): This volume "provides striking evidence (using a unique data set created at the World Bank) that strengthening the discretionary powers of prudential supervisors in countries with weak institutional environments leads to lower level of bank development, greater corruption in lending and banks that are less safe and sound. Following the Basel II recommendation of strengthening supervisory powers, therefore, may do more harm than good in developing countries, unless it is accompanied by substantial progress in institutional development."
Comments (1)
I think the point that so-called prudential supervision of banks produces the opposite of the intended effect is a very important one.
An equally important and related point is that the assumptions underlying Basel II are highly questionable. Has anyone done and/or published a comprehensive study of this matter? I'm thinking particularly of the heavy reliance on models, that themselves are based on chains of assumptions, many of them quite arbitrary.
Just curious! Frank Paine
Published: January 31, 2006 3:55 PM