The Political Economy of Banking Regulation – Does the Basel 3 Accord Imply a Change?

Abstract

Literature on the international financial architecture suggests that financial crises have had profound effects on both the balance of power in the establishment of financial regulation, and the economic impact of regulation on countries and regulated entities. In this article, we seek to add to this knowledge by studying the process by which the Basel Committee on Banking Supervision (BCBS) developed its third capital accord, the so-called Basel 3 accord. We also describe changes in BCBS's governance and standard setting process, and ask whether these may have caused the economic impact of Basel 3 to differ from the Committee's preceding capital accords (Basel 1 and 2). Our findings indicate that while BCBS still seem to develop standards that favor their traditional member countries, large international banks no longer seem as clearly favored by its latest capital accord. And while private actors still seem to dominate the exertion of influence over the committee, the governance structure of BCBS has changed towards a more transparent and politically accountable set-up. (F53, F59, P11, P16, G28)