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Three essays on the implemetation process of the Basel II capital accord

Novembre, Valerio (2008) Three essays on the implemetation process of the Basel II capital accord. Advisor: Lastra, Prof. Rosa M.. pp. 172. [IMT PhD Thesis]

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Abstract

The aim of the thesis is to analyze the implementation process of Basel II so to understand whether and to what extent national discrepancies might cause problems of competitive neutrality and thus invalidate the significant level of harmonization in capital adequacy regulation which was successfully achieved by Basel I. To achieve this result, this work looks at three different issues. The first paper looks at the negotiation process of an international soft law agreement and tries to understand whether it is able to explain its implementation results in terms of the actual degree of compliance across different countries. A game theory coordination model is suggested as a theoretical answer to this question, while the two Basel Accord cases are used to test the model empirically. The appreciation of the circumstances that led to the two Accords is proved as indicative of the reasons behind the widespread adoption of the Basel I Accord as opposed to the piecemeal implementation of Basel II. The aim of the second paper is then focus on the actual implementation of Basel II and to analyze how its second Pillar is likely to impact the banking industry in Europe. It finds evidence of a piecemeal implementation of Pillar II rules across Member States (MSs) which, in turn, is able to cause an alteration of the level playing field among banks depending on the country they are incorporated in,. It concludes that there is a clear case for further harmonization not only by reducing the extent of national discretions at the regulatory level, but more importantly in building up further arrangements for supervisory convergence and coordination. With the third paper the attention is finally drawn to possible problems of competitive neutrality arising from the fact that under Basel II "standardized" banks' level of capital is indirectly determined by rating agencies. Being their predictions often inconsistent one with the other, banks can in principle enact regulatory arbitrage strategies. And despite minimum standards are required by means of a common recognition process, the consistency of national authorities' assessment is still not guaranteed and banks might thus be provided with undue regulatory capital relief. A more institutional answer is needed if Europe wants in real fact to ensure competitive neutrality across MSs.

Item Type: IMT PhD Thesis
Subjects: H Social Sciences > HB Economic Theory
PhD Course: Economics, Markets, Institutions
Identification Number: 10.6092/imtlucca/e-theses/45
Date Deposited: 11 Jul 2012 15:08
URI: http://e-theses.imtlucca.it/id/eprint/45

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