Making Basel III Work for Emerging Markets and Developing Economies: A CGD Task Force Report
86 Pages Posted: 7 Jun 2019
Date Written: April 23, 2019
A sound financial regulatory framework is critical for minimizing the risk imposed by financial system fragility. In the world’s emerging markets and developing economies (EMDEs), such regulation is also essential to support economic development and poverty reduction. Meanwhile, it is increasingly recognized that global financial stability is a global public good: recent decades have seen the development of new international financial regulatory standards, to serve as benchmarks for gauging regulation across countries, facilitate cooperation among financial supervisors from different countries, and create a level playing field for financial institutions wherever they operate. For the worldwide banking industry, the international regulatory standards promulgated by the Basel Committee on Banking Supervision (BCBS) stand out for their wide-ranging scope and detail. Even though the latest Basel recommendations, adopted in late 2017 and known as Basel III, are, like their predecessors, calibrated primarily for advanced countries, many EMDEs are in the process of adopting and adapting them, and many others are considering it. They do so because they see it as in their long-term interest, but at the same time the new standards pose for them new risks and challenges. This report assesses the implications of Basel III for EMDEs and provides recommendations for both international and local policymakers to make Basel III work for these economies.
Keywords: Basel, financial regulation, banks, emerging markets, proportionality
JEL Classification: G15, G18, G21, G23, G28
Suggested Citation: Suggested Citation