Basel III, Clubs and Eurozone Asymmetries
29 Pages Posted: 5 Sep 2014
Date Written: August 15, 2014
Financial regulation has shifted from a system managed as an oligopoly dominated by the G2/G5 to expanded club membership like the Basel Committee for Banking Supervision (BCBS). Expansive clubs have to agree to terms that are closer to the preferences of soft-regulation members. Yet, once a global agreement on minimum standards, such as Basel III, is reached, the implementation is left to national or regional regulators. Deviations from the Basel III standards are bound to occur; the complexity of the agreement will facilitate an asymmetric implementation of national regulation and supervision. On the high side, countries like the US, UK, Australia, some Scandinavian countries and Canada have chosen higher standards. On the low side, we expect deviations to take place in those member countries of the Eurozone that are heterogeneous, have different preferences and tradeoffs between regulatory stringency and economic activity. The requirements of both global clubs and the EU regional club for transparency, monitoring and a level playing field will cause a collision between the interests of the clubs and their members, threatening to undermine global standard setting at the BCBS.
Keywords: Basel III, clubs, financial regulation, Eurozone, asymmetries.
JEL Classification: F33, F36, F42.
Suggested Citation: Suggested Citation