Machine generated contents note: 1.Introduction -- 1.1.Micro-prudential regulation -- 1.2.Systemic stability and macro-prudential regulation -- 2.The changing business of banking -- 3.Bank capital in historical perspective -- 3.1.The first Basel Accord -- 3.2.From Basel I to Basel II -- 4.Fundamental flaws in Basel capital rules -- 4.1.Regulatory capital -- 4.2.Risk-weighted assets -- 4.3.Misguided goals and supervisory capture -- 4.4.Systemic risk -- 5.Failed repairs with Basel III -- 6.Restoring sound prudential regulation -- 6.1.Capital requirements: what for and how much? -- 6.2.Combating supervisory forbearance -- 6.3.Market discipline with contingent capital -- 7.Conclusions
Summary
Leverage and risk taking by large international banks were the main causes of the 2008-09 financial crisis and the ensuing sharp drop in economic activity and employment. The author proposes the calculation of capital requirements without risk adjustment and creation of a system of mandated action by supervisors modeled on the US framework
