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The Limits of Globalizing Basel Banking Standards

Author

Listed:
  • Emily Jones
  • Alexandra O. Zeitz
Abstract
Though designed by a selective group of regulators from the world’s largest financial centres, Basel banking standards are being implemented far beyond the financial core, and this is often seen as confirmation of their global relevance. Yet, we show that the implementation of Basel II and III is shallow and highly selective in most countries outside of the Basel Committee on Banking Supervision. Drawing on primary and secondary sources and regression analysis, we attribute shallow and highly selective adoption to the sheer complexity of the standards, and the fact that they need substantial modification before they can be fully implemented, particularly in developing countries. Implementation challenges are compounded by gaps in the financial market infrastructure, notably credit rating agencies, as well as shallow capital markets. Beyond this, we attribute cross-country variation in implementation to differences in the underlying political economy of the banking sector. Countries are likely to pursue relatively high levels of Basel II and III implementation when large foreign and internationally active domestic banks operate in their jurisdiction and when they have a market-oriented approach to the financial sector. Conversely, countries are likely to pursue relatively low levels of implementation when they have few internationally active banks and a more interventionist approach.

Suggested Citation

  • Emily Jones & Alexandra O. Zeitz, 2017. "The Limits of Globalizing Basel Banking Standards," Journal of Financial Regulation, Oxford University Press, vol. 3(1), pages 89-124.
    • Handle: RePEc:oup:refreg:v:3:y:2017:i:1:p:89-124.
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    File URL: http://hdl.handle.net/10.1093/jfr/fjx001
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    Citations

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    Cited by:

    1. Bouvatier, Vincent & El Ouardi, Sofiane, 2023. "Credit gaps as banking crisis predictors: A different tune for middle- and low-income countries," Emerging Markets Review, Elsevier, vol. 54(C).
    2. Lepers, Etienne & Sánchez Serrano, Antonio, 2020. "Decomposing financial (in)stability in emerging economies," Research in International Business and Finance, Elsevier, vol. 51(C).
    3. Orla McCullagh & Mark Cummins & Sheila Killian, 2023. "Decoupling VaR and regulatory capital: an examination of practitioners’ experience of market risk regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 321-336, September.
    4. Johannes Matschke, 2021. "National Interests, Spillovers and Macroprudential Coordination," Research Working Paper RWP 21-13, Federal Reserve Bank of Kansas City.
    5. Dafe, Florence, 2018. "Fuelled power: oil, financiers and central bank policy in Nigeria," LSE Research Online Documents on Economics 89610, London School of Economics and Political Science, LSE Library.
    6. Sana Zidi & Boutheina Regaieg & Nessrine Hamzaoui, 2021. "The Determinants of the European Banking Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 11(4), pages 115-122.
    7. Coban, Mehmet Kerem, 2019. "Compliance forces, domestic policy process, and international regulatory standards: Compliance with Basel III," OSF Preprints x32nw, Center for Open Science.
    8. Gropp, Reint & Mosk, Thomas & Ongena, Steven & Simac, Ines & Wix, Carlo, 2024. "Supranational Rules, National Discretion: Increasing Versus Inflating Regulatory Bank Capital?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(2), pages 830-862, March.
    9. Farzad Haider Alvi & Peter J. Williamson, 2023. "Responses to global financial standards in emerging markets: Regulatory neoliberalism and the Basel II Capital Accord," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2635-2650, July.
    10. Barbara Casu & Laura Chiaramonte & Doriana Cucinelli, 2024. "The impact of liquidity on bank lending in South Africa," Working Papers 11063, South African Reserve Bank.

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