Impact of the 1988 Basle Accord on International Banks

Abstract

The ostensible purpose of the Basle Accord was to standardize bank‐capital regulations among the twelve leading industrial countries. Its ulterior goal was to “level the playing field” by eliminating a funding‐cost advantage of Japanese banks that had allowed them to capture more than one‐third of international lending. The wealth gain for Japanese bank shareholders was 31.63 percent. Wealth effects for shareholders of non‐Japanese banks were not significant. These results suggest that the Basle Accord did not eliminate the pricing advantage of Japanese banks, challenging the non‐Japanese regulators' contention that the regulation would help level the playing field.

Testing and comparing Value-at-Risk measures

“…In a recent survey of risk management software, Risk (1999) lists more than eighty commercial vendors o ering enterprise or trading risk management information systems. This e ort has beenencouraged by regulatory authorities imposing risk-based capital adequacy requirements on nancial institutions (see Dimson andMarsh, 1995, andWagster, 1996). The recent turbulence in emerging markets, starting in Mexico in 1995, continuing in Asia in 1997, and spreading to Russia and Latin America in 1998 has further extended the interest in risk management t o companies outside the traditional sphere of banking and insurance.…”

How Bank Risk Profiles Affect Their Strength: An Assessment of Banks in the Asia-Pacific Region

“…This is because almost half of the sample banks taken were Japanese banks, and they have been found to enjoy a funding cost advantage by operating with significantly lower capital-to-assets ratio compared to other G10 countries (Wagster, 1996). Before the Basel Capital Accord was imposed, the average capital-to-assets ratio was 2.11% and these low levels have been persistent even in recent years.…”

How Offshore Financial Competition Disciplines Exit Resistance by Incentive-Conflicted Bank Regulators

“…The theory of competitive reregulation tells us that the transfer of domestic market share to banks under the aegis of foreign regulators would dispose U.S. legislators and regulators toward helping the largest U.S. banks to expand their market share to restore their global industry ranking. Indeed, U.S. regulators were the major sponsors of the negotiations that resulted in other G-10 countries establishing risk-based capital standards that formalized traditional U.S. supervisory schemes (Wagster, 1996).…”