CIAO DATE: 07/2010
June 2010
Danish Institute for International Studies
One of the most signifi cant casualties of the recent fi nancial crisis has been the Basel II Accord, a set
of proposals to regulate the international banking system drawn up by a committee of G10 banking
supervisors between 1999 and 2004. Whether or not they view Basel II as a direct contributor
to the crisis, policymakers agree that the fundamental tenets of the accord have been decisively
discredited by recent events. In this paper, I ask why Basel II's creators fell so short of their aim of
improving the safety of the international banking system - that is, why Basel II failed. Drawing on
recent work on global regulatory capture, I present a theoretical framework which emphasizes the
importance of timing and sequencing in determining the outcome of rule-making in international
fi nance. Th is framework helps to explain not only why Basel II failed, but also why the latest set of
proposals to regulate the international banking system - the so-called ‘Basel III' Accord - is likely
to meet a similar fate.
Resource link: Reforming Global Banking Rules: Back to the Future? [PDF] - 204K