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Basel II and Developing Countries: Sailing through the Sea of Standards

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  • Andrew Powell

Abstract

Despite recently announced delays, Basel II - the new standard for bank capital - is due to be completed this year for implementation in the 13 Basel Committee member countries by the end of 2006. Should the other 170 or so member countries of the World Bank also adopt Basel II? Basel II was not written with developing countries in mind, but that does not necessarily mean that there is nothing in it for developing countries or that it can be ignored. Basels I and II represent a wide "Sea of Standards", this paper suggests five alternative Island-standards and five navigational tools to help countries choose their preferred Island within the Sea. It is suggested that for some developing countries the Standardized Approach will yield little in terms of linking regulatory capital to risk but that countries may need many years of work to adopt the more advanced Internal Rating Based Approach. The paper then proposes a Centralized Rating Based (CRB) approach as a transition measure. The paper also makes proposals regarding a set of largely unresolved cross-border issues.

Suggested Citation

  • Andrew Powell, 2004. "Basel II and Developing Countries: Sailing through the Sea of Standards," Business School Working Papers baseldc, Universidad Torcuato Di Tella.
    • Handle: RePEc:udt:wpbsdt:baseldc
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    File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-062004.pdf
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    References listed on IDEAS

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    1. Margaret J. Miller (ed.), 2003. "Credit Reporting Systems and the International Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262134225, April.
    2. Glaessner, Thomas & Kellermann, Tom & McNevin, Valerie, 2002. "Electronic security - risk mitigation in financial transactions : public policy issues," Policy Research Working Paper Series 2870, The World Bank.
    3. Carey, Mark, 2002. "A guide to choosing absolute bank capital requirements," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 929-951, May.
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    Cited by:

    1. Marwan Elkhoury, 2007. "Credit Rating Agencies And Their Potential Impact On Developing Countries," UNCTAD Discussion Papers 186, United Nations Conference on Trade and Development.
    2. Étienne Farvaque & Catherine Refait-Alexandre, 2016. "Les exigences de transparence des accords de Bâle : aubaine ou fardeau pour les pays en développement ?," Mondes en développement, De Boeck Université, vol. 0(1), pages 131-147.
    3. Javier Santiso, 2008. "Banking on Development. Private Financial Actors and Donors in Developing Countries," OECD Development Centre Policy Briefs 34, OECD Publishing.
    4. Gerard Caprio, 2013. "Financial regulation after the crisis: how did we get here, and how do we get out?," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 1-49.
    5. Javier Rodríguez & Javier Santiso, 2007. "Banking on Development: Private Banks ans Aid Donors in Developing Countries," OECD Development Centre Working Papers 263, OECD Publishing.
    6. Saadaoui, Zied, 2009. "Fonds propres réglementaires et stabilité bancaire dans les pays émergents [Capital Requirements and Banking Stability in Emerging Countries]," MPRA Paper 25217, University Library of Munich, Germany.
    7. Petr Teply & Milan Matejašák, 2007. "Regulation of Bank Capital and Behavior of Banks: Assessing the US and the EU-15 Region Banks in the 2000-2005 Period," Working Papers IES 2007/23, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2007.
    8. Andrew Powell, 2004. "Implications of Basel II for Latin America," Business School Working Papers basel, Universidad Torcuato Di Tella.

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