Why Basel Iii Is Doomed

• GLOBAL ECONOMIC GOVERNANCE PROGRAMME •

Why Basel II Failed and Why Any Basel III is Doomed

Ranjit Lall

October 2009

GEG Working Paper 2009/52

Global Economic Governance Programme

Centre for International Studies │ Department for Politics and International Relations

The Global Economic Governance Programme was established at University College, Oxford in 2003 to foster research and debate into how global markets and institutions can better serve the needs of people in developing countries. The three core objectives of the programme are: to conduct and foster research into international organizations and markets as well as new public-private governance regimes; to create and maintain a network of scholars and policy-makers working on these issues; to influence debate and policy in both the public and the private sector in developed and developing countries. The Programme is directly linked to Oxford University’s Department of Politics and International Relations and Centre for International Studies. It serves as an interdisciplinary umbrella within Oxford drawing together members of the Departments of Economics, Law and Development Studies working on these issues and linking them to an international research network. The Programme has been made possible through the generous support of Old Members of University College.

1

Ranjit Lall

Ranjit Lall presently is a research associate in International Relations at St. John’s College, Oxford University. He studied PPE at Merton College and won the 2009 Gibbs Prize for best politics thesis at Oxford. His main research interest is in global financial regulation.

Abstract According to conventional wisdom, the Basel II Accord – a set of capital adequacy standards for international banks drawn up by a committee of G-10 supervisors – is essential if we are to avoid another financial crisis. This paper argues that this conclusion is false: Basel II is not the solution to the crisis, but instead an...