Resources for Basel II Capital Accord (Basel II)

Regulator role in crisis up for debate

www.theaustralian.news.com.au

A primary cause _ according to the OECD's deputy director of financial markets, Adrian Blundell-Wignall. Completely peripheral _ according to Australia's chief banking regulator, APRA chairman John Laker.
The two crossed swords at the Reserve Bank of Australia's Kirribilli private retreat last week, where Laker was discussing a presentation by Blundell-Wignall.
Blundell-Wignall is one of the most creative thinkers about financial markets and is widely respected for the chillingly accurate portrayal of how the crisis would unfold _ which he delivered last July, a few weeks before the storm broke. He is a former senior economist at the RBA, to which he still has strong links.
Blundell-Wignall fingers two regulatory causes for the crisis: the announcement of the details of how the bank capital regulatory system, Basel II, would work in July 2004 and, paradoxically, a regulatory crackdown on the operations of US mortgage funders Fannie Mae and Freddie Mac in the same year.
The first, he says, made it a lot more attractive for banks to enter the mortgage business, while the second cleared the principal competition from the field.

View the Resource

Share or bookmarklet this web page at: