There is a view that unelected central bankers in Basel should not be empowered to trigger radical changes in capital flows in emerging markets.
But that outcome is one of the implications of the new capital adequacy framework proposed in June by the Basel Committee on Banking Supervision. In fact the proposals, put out for consultation until March 31 next year, immediately had an impact on the credit spreads of some middle-rated countries.
Why? Because among other things the new framework proposes to use external credit ratings to fix the amount of capital banks should hold against assets of specific companies, financial institutions, and countries.
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