The Basel Risk-Based Capital Standards: Are they Workable?

Audio of this event, held May 1, 2007 at the National Press Club, Washington, D.C., presented by the Federalist Society's Financial Services Practice Group

Attempts by U.S. banking regulators to modernize risk-based banking standards, in the context of the international Basel bank capital standards, have been plagued by complexity, confusion, and delay. What started out more than a decade ago as an update to Basel I (adopted in 1988) has degenerated into several variants, none of which has enjoyed broad support. The ongoing debate over Basel reform has led to at least a decade of delay in updating Basel I, and further delays are highly likely, raising the prospect that the entire global Basel reform process will collapse. Further complicating Basel reform are the potential unintended consequences on the interaction between risk-based capital standards of any type and the unique-to-the-U.S. leverage capital standards for banks.