Resources for Basel II Capital Accord (Basel II)

The End of Our Banking System?

seekingalpha.com

The American Banking System is one of the most regulated industries in America. Since 1935, banks have had to deal with regulations that no other industry has come near. So what went wrong? Because of 1929, banking regulations were devised setting up minimal capital requirements. They established capital adequacy ratios in order to prohibit banks from lending more than 12 times their capital plus retained earnings. But regulators did not take into account future inflation. So regulation forced banks to limit their lending to 12 times their inflation-eroded capital.

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