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Moosa, Imad --- "Basel II to Basel III: A Great Leap Forward?" [2011] ELECD 505; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Managing Risk in the Financial System" (Edward Elgar Publishing, 2011)

Book Title: Managing Risk in the Financial System

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857933812

Section: Chapter 20

Section Title: Basel II to Basel III: A Great Leap Forward?

Author(s): Moosa, Imad

Number of pages: 23

Extract:

20. Basel II to Basel III: a great leap
forward?
Imad Moosa

20.1. INTRODUCTION

The global financial crisis has revealed the inadequacy of Basel II and
exposed its loopholes. As a result, the Basel Committee on Banking
Supervision (BCBS) has come up with proposals to overhaul and reform
Basel II, so that it can deal with a future crisis of the magnitude of the
global financial crisis. The reforms, as Nout Wellink argues, are designed
to respond to key pre-crisis shortcomings.1 On 19 December 2009 the
BCBS announced the publication of two consultative documents for
review and comments: Strengthening the Resilience of the Banking Sector;2
and International Framework for Liquidity Risk Measurement, Standards
and Monitoring.3,4 The two documents contain the details of a `reform
package' designed to `improve the banking sector's ability to absorb
shocks arising from financial and economic stress, whatever the source,
thus reducing the risk of spillover from the financial sector to the real
economy'.5 The reform proposals constitute what has become to be known
commonly as Basel III, a term that is not used officially by the BCBS.6, 7
The objective of this chapter is to evaluate the BCBS reform proposals in
relation to the developments unfolding during the global financial crisis. It
was claimed, at one time, that Basel II was a great leap forward compared
to Basel I, but that turned out not to be the case. Here, we want to find out
if the ...


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