What is it about?
Although there has been considerable focus on minimum capital requirements since Basel II - namely improvements aimed at enhancing the quality and quantity of capital, focus on Systemic Globally Relevant Institutions, there are still many concerns - particularly in respect of transparency of the derivative markets, SFTs, shadow banking activities - as well as the rising crypto asset markets. Conservation buffers , as well as counter cyclical buffers were introduced after Basel II. All in response to a prevalent flaw in Basel II - namely, the need to address pro cyclicality.
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Why is it important?
Addressing pro cyclicality was considered necessary because an important lesson from the GFC was that even though many banks had met stipulated capital requirements, other issues relating to liquidity and leverage ratios, had to be addressed. This was illustrated during the Northern Rock Crisis.
Perspectives
Read the Original
This page is a summary of: Basel II and the Capital Requirements Directive: Responding to the 2008/09 Financial Crisis, SSRN Electronic Journal, January 2009, Elsevier,
DOI: 10.2139/ssrn.1475189.
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