Author(s):	Thomas Gehrig
Publication Date:	February 2013
Keyword(s):	bank capital, Basel process of capital regulation, trust
JEL(s):	E58, G01, G21, H63
Programme Areas:	Public Economics, Financial Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=9348

This note critically assesses the Basel reform process of capital regulation. It highlights the political nature of this process and argues that the absence of clearly spelled-out societal objectives has been detrimental in furthering stability and soundness of the banking systems in the run-up of the 2007/8 financial crisis. The positive externalities of bank capital have not hitherto been explicitly been taken into consideration.