Breakingviews: Basle II could be bettered

Source: www.breakingviews.com is Europe's leading financial commentary service
Date: June 2003
By Jonathan Ford

When the world's richest countries decided 15 years ago to coordinate national banking regulation in response to the upsurge in cross-border lending, their purpose was two-fold. They wanted to prevent a blow-up occurring in a big international bank that could hurt all of them. They also wanted to create a level playing field between banks with tough regulation and those in more easy-going jurisdictions.

The resulting treaty - the Basle accord of 1988 - has been successful in creating a level playing field. Most national regulators have since adopted it. But it has been less effective at regulating the credit risk taken on by banks.

Its planned successor - known as Basle II - risks going the other way. The US has just announced that it will only require a handful of banks to adhere to...