DP9348 | Capital, Trust and Competitiveness in the Banking Sector

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Publication Date

17/02/2013

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Abstract

This note critically assesses the Basel reform process of capital regulation. It highlights the political nature of this process and argues that the absence of clearly spelled-out societal objectives has been detrimental in furthering stability and soundness of the banking systems in the run-up of the 2007/8 financial crisis. The positive externalities of bank capital have not hitherto been explicitly been taken into consideration.