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From failure to failure: The politics of international banking regulation

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  • Ranjit Lall

Abstract

It is now clear that Basel III, a much discussed set of proposals to govern the international banking system drawn up by the Basel Committee on Banking Supervision, has fallen far short of its creators’ aims. Even more puzzlingly, this is not without precedent. Eleven years ago, partly in response to the Asian financial crisis of 1997, the Basel Committee attempted to overhaul global banking rules in order to enhance the stability of the global financial system. The culmination of its five-year efforts, the Basel II Accord, was abandoned by regulators before ever being fully implemented. In this paper, I ask why Basel II failed to meet the Basel Committee's original objectives and why Basel III has met a similar fate. Drawing on recent work on the politics of global regulation, I present a theoretical framework which emphasizes the importance of timing and sequencing in determining the outcome of rule-making in global finance. The success of this framework in explaining the failure of Basel II and Basel III is an invitation to scholars in the field of International Relations to take ‘time’ seriously as an analytical variable.

Suggested Citation

  • Ranjit Lall, 2012. "From failure to failure: The politics of international banking regulation," Review of International Political Economy, Taylor & Francis Journals, vol. 19(4), pages 609-638.
    • Handle: RePEc:taf:rripxx:v:19:y:2012:i:4:p:609-638
    DOI: 10.1080/09692290.2011.603669
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    Cited by:

    1. Kevin Young & Stefano Pagliari, 2017. "Capital united? Business unity in regulatory politics and the special place of finance," Regulation & Governance, John Wiley & Sons, vol. 11(1), pages 3-23, March.
    2. Barbora SUTOROVA & Petr TEPLY, 2013. "The Impact of Basel III on Lending Rates of EU Banks," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 226-243, July.
    3. Andreas Kruck, 2017. "Asymmetry in Empowering and Disempowering Private Intermediaries," The ANNALS of the American Academy of Political and Social Science, , vol. 670(1), pages 133-151, March.
    4. Butzbach Olivier & von Mettenheim Kurt E., 2015. "Alternative Banking and Theory," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(2), pages 105-171, July.
    5. Coban, Mehmet Kerem, 2019. "Compliance forces, domestic policy process, and international regulatory standards: Compliance with Basel III," OSF Preprints x32nw, Center for Open Science.
    6. Schuknecht, Ludger & Siegerink, Vincent, 2020. "The political economy of the G20 agenda on financial regulation," European Journal of Political Economy, Elsevier, vol. 65(C).
    7. Andrew Baker, 2013. "The gradual transformation? The incremental dynamics of macroprudential regulation," Regulation & Governance, John Wiley & Sons, vol. 7(4), pages 417-434, December.
    8. Mettenheim Kurt, 2013. "Back to Basics in Banking Theory and Varieties of Finance Capitalism," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 357-405, May.
    9. Ding, Dong & Sickles, Robin C., 2018. "Capital Regulation, Efficiency, and Risk Taking: A Spatial Panel Analysis of U.S. Banks," Working Papers 18-004, Rice University, Department of Economics.
    10. Sébastien Commain, 2021. "‘Don’t Crunch My Credit’: Member State Governments’ Preferences on Bank Capital Requirements," Politics and Governance, Cogitatio Press, vol. 9(2), pages 196-207.
    11. Adam W. Chalmers, 2020. "Unity and conflict: Explaining financial industry lobbying success in European Union public consultations," Regulation & Governance, John Wiley & Sons, vol. 14(3), pages 391-408, July.
    12. Phillip Anthony O’Hara, 2013. "Policies and Institutions for Moderating Deep Recessions, Debt Crises and Financial Instabilities," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(1), pages 19-49, March.
    13. Stefano Pagliari & Meredith Wilf, 2021. "Regulatory novelty after financial crises: Evidence from international banking and securities standards, 1975–2016," Regulation & Governance, John Wiley & Sons, vol. 15(3), pages 933-951, July.
    14. Lucia Quaglia & Aneta Spendzharova, 2017. "Post‐crisis reforms in banking: Regulators at the interface between domestic and international governance," Regulation & Governance, John Wiley & Sons, vol. 11(4), pages 422-437, December.
    15. Florence Dafe & Rebecca Elisabeth Husebye Engebretsen, 2023. "Tussle for space: The politics of mock‐compliance with global financial standards in developing countries," Regulation & Governance, John Wiley & Sons, vol. 17(2), pages 328-345, April.
    16. Christensen, Rasmus Corlin, 2017. "Professional Competition in Global Tax Reform: Transparency in Global Wealth Chains," SocArXiv gu63m, Center for Open Science.
    17. Justin Greenwood & Christilla Roederer‐Rynning, 2015. "The “Europeanization” of the Basel process: Financial harmonization between globalization and parliamentarization," Regulation & Governance, John Wiley & Sons, vol. 9(4), pages 325-338, December.
    18. Ranjit Lall, 2015. "Timing as a source of regulatory influence: A technical elite network analysis of global finance," Regulation & Governance, John Wiley & Sons, vol. 9(2), pages 125-143, June.
    19. Dawa Sherpa, 2013. "Critical Evaluation of Basel III as Prudential Regulation and its Consequences in Developing Countries’ Credit Needs," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 253, Ekonomik Yaklasim Association.
    20. Florian Buck, 2014. "Financial Regulation and the Grabbing Hand," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(04), pages 03-13, January.
    21. Baker, Andrew, 2015. "The bankers’ paradox: the political economy of macroprudential regulation," LSE Research Online Documents on Economics 61998, London School of Economics and Political Science, LSE Library.
    22. 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.

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