Talk:Basel II

1. I deleted the below e-mail address from the article, where another editor had inserted it as the source for straightening out possible confusion between the BIS and the BCBS. Didn't seem very encyclopedic to have e-mail addresses in the body of the article! --Christofurio 15:51, Mar 27, 2005 (UTC) (source: tony.blunden@chasecooper.com).
2. Someone seems to have vandalised this page. Does anyone know how to revert back? --mkamat 19:39, August 17, 2005 (UTC)

November 2005 Update

I have updated the page to incorporate the latest changes to the Accord. Over the next few weeks I will also be making some extensive changes to greatly expand the entry, incorporating some of the latest thinking on its effects on the banking industry. I will also be adding new entries to explain some of the terms I will be using. I will flag any major changes in discussion first. As this is my first real contribution to the Wiki, please feel free to comment and I apologise in advance for any errors I may make. They will not be out of malice, merely incompetance in using the interface.
Andrew Reynolds 06:26, 22 November 2005 (UTC)

24 July 2006 - Pronunciation

Can somebody clarify how this should be pronounced in English. I believe the Swiss city of Basel is pronounced 'bä-z&l with a very pronounced Z - as in German "s".

The English name Base(i)l is also pronounced in the same way.

If it's an acronym and has some other reason to not be pronounced like that, then I believe it has to be explained, but I find it unacceptable that English speakers should pronounce this Baal. I really can not think of a reason for the Baal pronunciation and I think some authoritative source must be found that decides one way or another....

You find it "unacceptable"? Jeez, tough world you live in. You must get disappointed a lot. But, in answer to your question, Basel/Basle is a Swiss city, and whether you pronounce it "'bä-z&l" or "baal" depends on whether you like French or German. (Personally, I pronounce it "Pea-kan") Epstein's Mother 04:27, 23 July 2007 (UTC)

Pronunciation

There are, as far as I know, three "correct" pronunciations. As far as any pronunciation in English can be considered "correct", pronouncing it like the English name "Basil" (Basil Fawlty) is probably correct. This has the shorter "ah" sound, but is similar to the German. The French pronunciation is the one you are objecting to. It is correctly spelt "Bâle", but sounds like "Baal" to an English speaker. The staff of the BIS from French speaking countries use this pronunciation, so you do often hear it. Personally, I use the German pronunciation, with the accent on the "a" to make it sound like "ar", with the hard "s". The town is a german speaking one, so I believe they have the pronunciation of their own town's name correct. Andrew Reynolds 14:47, 19 August 2006 (UTC) There is a distinction between the way the Swiss pronounce the name of the city and the way finance professionals pronounce the name of the accord. Bah-zel Two as distinct from Baaal. If the standard pronounciation of the name of the accord differs from that applied to the city, does it matter? —Preceding unsigned comment added by 96.224.19.16 (talk) 05:59, 26 May 2009 (UTC) According to me Bazel is the correct Pronunciation- Poonam India —Preceding unsigned comment added by 203.117.180.210 (talk) 13:05, 26 May 2009 (UTC)

definition

I'm looking for a thumbnail definition of what Basel II is, describing it in terms that can be understood by someone who isn't already familiar with it. --CodeGeneratR 21:58, 14 March 2007 (UTC)

A very fair point - the current article begins "The final version aims at:", which is hardly a clear introduction to anything. Please can someone who understands Basel II provide a two- or three-sentence introduction for non-specialists. Earthlyreason 08:11, 3 April 2007 (UTC)

I added an introductory sentence that points to the general Basel Accords. I think a better definition is still needed but I'm not familiar enough to write a better one.--CodeGeneratR 01:46, 29 April 2007 (UTC)

I've worked with Basel II for the last few years, so happy to write a 2-3 line summary. But the current article makes perfect sense to me. That's the problem ... I obviously can't see the confusion, I'm not confused! Perhaps I could start out with something like: "Basel II represents a fundamental change the the calculation and measurement of regulatory capital (that is, the amount of capital a bank is obliged to hold) and introduces rigorous risk and capital management requirements. The overall aim of Basel II is to set rules in place which ensure that a bank holds capital reserves appropriate to the risk position it undertakes to safeguard its own economic stability and solvency. In general, the greater the risk appetite of a bank the greater amount of capital it will be required to hold."

Does that make sense? Or does it still require too much previous knowledge? 195.217.52.130 15:08, 27 July 2007 (UTC)

How about this as an intro (borrowing from above)?

Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Advocates of Basel II believe that such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. Generally speaking, these rules mean that the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability.

Epstein's Mother 19:13, 5 August 2007 (UTC)

"The final version aims at:

Ensuring that capital allocation is more risk sensitive;"

Isn't it supposed to be LESS sensitive...? —Preceding unsigned comment added by 83.226.206.8 (talk) 18:26, 21 November 2007 (UTC)

No, actually it means that the capital allocation is more sensitive to the risk the firm is carrying -- so the more risk, the greater the haircut, the less risk the less the haircut. The overall result, though, is to make the firm less risky. A bit counterintuitive. Epstein's Mother (talk) 22:26, 21 November 2007 (UTC)

When was Basel II enacted or agreed upon?

The article lists updates to Basel II, but it does not state when Basel II originally was "enacted," if that's the right term. When did the BCBS reach accord on the Basel II Accord? This info also is missing from the Basel Accords article, which does state that Basel I was published in 1988. Kirkpete (talk) 18:46, 2 January 2008 (UTC)

B3

I removed the bit about Basel III - there's no talk about it in the industry, other than hypothetically ... and there were no references/citations around B3 on this page, so it's best off removed. Who knows if we'll ever see B3? It's not a foregone conclusion. 87.194.61.149 (talk) 21:27, 28 January 2008 (UTC)

Criticisms Section

That whole criticisms section is waaaaaay out of line. Someone put in the necessary references instead of leaving the author as the final authority on truth and fact, or I'll come back and start mass-altering the article. Caidence (talk) 20:32, 9 June 2008 (UTC)

Agree wholeheartedly. Martin ^{(Talk, Contribs)} 10:24, 29 July 2008 (UTC)

US-Centric

Basel affects more than the US, but a good chunk of this article is devoted to US implementation, and seems to assume that everything is in a US context. How about putting that information in a separate section (e.g., "Basel II implementation in the US") or another article? Of course, that begs the question of why other countries aren't listed, which means maybe it should be removed. mnot (talk) 22:42, 8 October 2008 (UTC)

I think it would be better to just put in more sections about implementation elsewhere, rather than removing a section because of a perceived lack of symmetry. Epstein's Mother (talk) 17:18, 9 October 2008 (UTC)

Global financial crisis

The global financial crisis has been in full swing for more than a year now. Hundreds of banks have collapsed worldwide, thousands more need shoring up, governments are putting at risk trillions in taxpayer money, and I find nothing in the article to address how Basel II relates. Specifically,

• How is it possible that banks could circumvent the safeguards implemented under Basel II that were designed to reduce risk.

Perhaps because they were not designed to reduce risk, but to increase political control of who got the money. In short, any explanation of Basel II and the crisis is going to be violently political, and will have a striking absence of official sources and official truth. Any honest discussion of Basel II is going to be a bit like an honest discussion of anthropogenic global warming - hard to conduct on Wikipedia in accordance with Wikipedia rules James A. Donald (talk) 02:24, 18 April 2010 (UTC)

• Why did regulators allow banks to set up "conduits" (special purpose investment vehicles) off the balance sheets that were undercapitalized and put the banks, investors, creditors, employees, and communities at risk.
• Was circumvention legal or not. If legal, is Basel II a "paper tiger", and what are the responses to address this.

It was illegal, and also mandatory. When you have thousands of pages of regulations, everything is forbidden, and most of what is forbidden is also mandatory, has to be mandatory, lest everything come to a complete stop. Lots of things happened that were conspicuously, undeniably, and flagrantly illegal, yet not one prosecution has occurred, indicating that the regulators wanted, expected, and intended these things to happen, that the regulators had commanded these things specifically, and Basel II commanded them in general and in principle. In the listed, the regulators wanted easy money for everyone, and especially easy money for protected minorities, and so were unwilling and unable to penalize those that made easy money available. James A. Donald (talk) 02:24, 18 April 2010 (UTC)

Accordingly I have placed a tag on the Article page asking for missing information to be supplied.--Goodmorningworld (talk) 12:29, 6 November 2008 (UTC)

Good questions - I think the answer is that Basel 2 was a waste of time - it left far too many loopholes for 'judgement' to be exercised in the setting of parameters and hence determining capital adequacy. One huge irony is that the banks were keen on the accord because they thought they had too much capital and they would be allowed to release it ! --John Price (talk) 09:33, 19 January 2009 (UTC)

Thank you. Now if we can find a reliable source that has offered commentary along those lines…--Goodmorningworld (talk) 22:18, 19 January 2009 (UTC)

See The Tower of BIS Basel: Secretive Plans for the Issuing of a New Global Currency —Preceding unsigned comment added by 70.164.108.158 (talk) 16:03, 20 April 2009 (UTC)

I'm not awareof any specific sources that have offered commentary on Basel II's gaps/flaws as it relates to the risk management meltdown. Although it is widely accepted that the limited definition of 'risk' -- the focus on credit risk & VaR -- enabled institutions to limit their own risk management emphasis to what was required of them by the terms of Basel II. Since the risk management function was widely viewed as a constraint on ROE by the banking/investment banking industry, there was no willingness to consider new kinds of risks that proved crucial -- esp. liquidity risk, which was the vital element in the 2007/2008 financial crisis. Everyone accepted that Basel II was flawed; similarly, everyone knew how hard it had been to get agreement even on these terms. And at the same time, no one really expected "the perfect storm". So Basel II, to the extent it is a cause of the current crisis, more reflects a wider unwillingness to try to grapple with the slippery issue of what is risk and how is it defined/measured. Basel II didn't cause the crisis; but it enabled the crisis to be as bad as it was because of what was NOT dealt with, overlooked or deliberately excluded. ----

Actually, the whole business of being able to risk-weight assets such as CDOs (very safe, as they were all "AAA") was an enormous part of the 'why' this could happen. Part of the answer was that the CRAs were complicit and corrupt, and part of it was because of that idiotic formula David Li or whatever his name is created, which rested on the assumption that systems could not organize into critical states. But these kinds of methodological issues are endemic in most of economics, so it's hard to figure out where to start on this. Yves Smith says something about the failures of Basel 2 in her book Econned, p. 181&195.boombaard (talk) 13:46, 5 December 2010 (UTC)

Hello, first time posting on Wikipedia, pardon format. I did find some research on the topic. See Andresen's research which points out that endogenous money growth is a side effect of Basel type regulation that focuses on capital/asset ratios. This creates monetary inflation. The article is pretty in depth including modelling of central banking and CDO's. Will be glad to write up a summary for the main page, although I suspect the abstract will do. marcf999

"Nationalism" rather than economics

This paragraph in the article is more nationalism than economics: "...they forced European banks, and the European Central Bank itself to rely more than ever on standardized assessments of credit risk marketed by two non-European private agencies- Moody’s and S&P. Ironically, the European Central Bank has abdicated part of its regulatory authority in favor of a non-European, highly deregulated, private cartel… "

Fitch is a European rating agency headquarted in Paris and it did not much help to safe Europe from the financial crisis neither. Nor did it help the US that Moody's and S&P are headquartered in US. I am cutting out the "non-European" part for the sake of keeping the rest of the idea. However, if the document that links to it says that "one of the cause of the crisis was that Europe abdicated part of its authority to non-European rating agencies", then it probably needs to be deleted entirely.

--Wikijasmin (talk) 22:59, 15 December 2011 (UTC)

Agreed. Also, I "eyeballed" the original CRD published by the European regulators, and there are enough guidelines on ECAI's (basically credit ratings agencies). I am yet to come across an unbiased article on the role of external credit ratings agencies and will add links once I find one. Anindya m 1982 (talk) 05:28, 16 December 2011 (UTC)

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