The Political Economy of Global Financial Governance: The Costs of Basle Ii for Poor Countries

World Economy & Finance Research Working Paper No. WEF 0015

50 Pages Posted: 14 Nov 2006

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Geoffrey R. D. Underhill

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR)

Xiaoke Zhang

University of Nottingham - School of Politics

Date Written: November 2006

Abstract

The 1990s financial crisis triggered many changes to the design of the international financial system, the so-called international financial architecture. While much affected, developing countries have had very little influence on the changes, which the formulation of the new Basle capital accord (B-II) illustrates. The article shows that B-II has largely been formulated to serve the interests of powerful market players, with developing economies being left out. For developing countries, B-II can make domestic financing more costly and raise the costs of and reduce the access to external financing. Importantly, B-II can exacerbate fluctuations in the supply of external financing, an unfortunate outcome, given that developing countries already suffer from volatility.

Keywords: Basle committee, capital adequacy, financial governance, financial architecture, financial reform, international standards, capital flows, poor countries, cost of capital, international development

Suggested Citation

Claessens, Stijn and Underhill, Geoffrey R. D. and Zhang, Xiaoke, The Political Economy of Global Financial Governance: The Costs of Basle Ii for Poor Countries (November 2006). World Economy & Finance Research Working Paper No. WEF 0015. Available at SSRN: https://ssrn.com/abstract=944530 or http://dx.doi.org/10.2139/ssrn.944530

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Geoffrey R. D. Underhill

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR) ( email )

Amsterdam, 1012 CX
Netherlands
+31 20 525 2172 (Phone)
+31 20 525 2086 (Fax)

Xiaoke Zhang

University of Nottingham - School of Politics ( email )

Nottingham
United Kingdom
+44 115 846 7781 (Phone)

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