The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

It’s time to scrap the Basel system

Like the unseen rule-master in the British television show Big Brother, the Basel Accord encourages infantile behaviour among its charges. Within the confines of the system, rational, intelligent adults are transformed into pouting, tantrum-throwing, devious children.

Banks have spent the time they have been locked away in the unreal world of Basel devising all manner of time-consuming and ultimately pointless games. They have, for example, created hybrid tier one capital securities, a form of capital that obeys the letter of the Basel rules but flouts their spirit.

On the asset side of the balance sheet, the subterfuge has been even greater. Banks have transferred hundreds of billions of dollars of their best assets to the capital markets through collateralized loan obligations while hanging on to the most poisonous stuff. They know this is illogical. But the paternalism of Basel creates a culture of rule-bending and discourages good risk management.

Outside, in the real world, there are other financial services corporations - the insurance companies - that wouldn't stand for any of this sort of nonsense. Their true regulators are the rating agencies and the equity markets. A small player such as recent UK bankrupt Independent Insurance may sail too close to the wind and come to grief.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree