Basel Ii and Developing Countries: Sailing Through the Sea of Standards

51 Pages Posted: 20 Apr 2016

See all articles by Andrew Powell

Andrew Powell

Inter-American Development Bank (IDB); Universidad Torcuato Di Tella - School of Business; Harvard University - Center for International Development (CID)

Date Written: September 2004

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 plus 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." Powell suggests five alternative island-standards and five navigational tools to help countries choose their preferred island within the sea. He suggests 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 author then proposes a centralized rating-based approach as a transition measure. He also makes proposals regarding a set of largely unresolved cross-border issues.

This paper - a product of the Financial Sector Operations and Policy Department - is part of a larger effort in the department to inform policymakers on banking regulation and supervision.

Suggested Citation

Powell, Andrew P. and Powell, Andrew P., Basel Ii and Developing Countries: Sailing Through the Sea of Standards (September 2004). World Bank Policy Research Working Paper No. 3387, Available at SSRN: https://ssrn.com/abstract=625264

Andrew P. Powell (Contact Author)

Inter-American Development Bank (IDB) ( email )

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Universidad Torcuato Di Tella - School of Business ( email )

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Argentina
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+5411 4783-3220 (Fax)

Harvard University - Center for International Development (CID) ( email )

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Cambridge, MA 02138
United States

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