Some Talk: The Biased Base of Basel

by Takeo Hoshi, Voxeu.org Implementation of Basel III in the US Will Bring Back the Regulatory Arbitrage Problems under Basel I Rejigging financial regulation is in vogue. But, in the world of international finance, how well do different regulatory systems join up? This column argues that the US Dodd Frank Act and Basel III are, in part, incompatible and that harmonising them may lead to unintended consequences. The US ought to tread carefully here but should also try hard to maintain the spirit of better financial regulation. In the aftermath of the global financial crisis, many countries have been redesigning their financial regulatory frameworks. In the US, the Dodd Frank Act of 2010 specified the directions for new financial regulations. The US financial regulatory agencies, including those that were newly created by Dodd-Frank, have been busy writing and rewriting the rules....