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Recommended Readings: Finance

 

Basle 2 : The route ahead or cul de sac by Richard Brealey | Journal of Applied Corporate Finance, Fall 2006

This article examines some strategic issues pertaining to Basle 2. The new Basle accord is expected to enhance banks’ safety and soundness, strengthen the stability of the financial system as a whole, and improve the financial sector’s ability to serve as a source for sustainable growth for the broader economy. But the record of success of past changes to the regulatory system in reducing bank failures suggests that this may be a somewhat rosy assessment. While an increase in capital requirements may reduce the incidence of bank failure, its efficacy depends on the accuracy and frequency with which bank assets are valued. Brealey argues that the right way  is to move toward an explicit system for regulatory purposes of market-value accounting for bank assets.