Resources for Basel II Capital Accord (Basel II)

OECD blames weak bank regulation for financial crisis

business.timesonline.co.u

A “gobsmacking” weakness in the way banks are regulated led to the current financial crisis, the OECD says today. The club of rich nations, in its twice-yearly financial review, blasted the regulatory framework as “very poor” because not only did it fail to prevent the crisis but also contributed to it.One of the key triggers was the introduction of a new regime for supervising all banks, the Basle II regime, which significantly boosted the attrac-tiveness to banks of lending money secured on residential property.That led to a rise in loans to sub-prime borrowers, which were then packaged into securities and sold to institutions. The OECD traced the roots of the problem to 2004, when there was “a veritable explosion” in residential mortgage-backed securities, presaged by four events.

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