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Implementing Basel II: Is the Game Worth the Candle?

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  • Richard Herring

Abstract

In this article the author provides an extensive analysis of the various aspects of the Basel II Accord. Notwithstanding the gains from adoption of Basel II, he argues that these gains are unlikely to outweigh the costs of implementation and compliance: Basel II will be very costly for banks, home and host country supervisors, and, to the extent that it exacerbates macroeconomic cycles, to the broader economy as well.

Suggested Citation

  • Richard Herring, 2005. "Implementing Basel II: Is the Game Worth the Candle?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 14(5), pages 267-287, December.
    • Handle: RePEc:wly:finmar:v:14:y:2005:i:5:p:267-287
    DOI: 10.1111/j.0963-8008.2005.00108.x
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    1. Benston, George, et al, 2003. "Bank Capital Structure, Regulatory Capital, and Securities Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 301-322, June.
    2. Richard J. Herring, 2002. "The Basel 2 Approach to Bank Operational Risk: Regulation on the Wrong Track," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 4(1), pages 42-45, April.
    3. Herring, Richard J, 1999. "Credit Risk and Financial Instability," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 15(3), pages 63-79, Autumn.
    4. Julapa Jagtiani & George Kaufman & Catharine Lemieux, 2002. "The Effect of Credit Risk on Bank and Bank Holding Company Bond Yields: Evidence from the Post‐FDICIA Period," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(4), pages 559-575, December.
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