Basel III, a regulatory framework designed with the goal of enhancing international financial stability in the aftermath of the global financial crisis, was tailored to banks in advanced economies. However, regulators in emerging markets and developing economies (EMDEs) are also embracing these standards, even though doing so may pose challenges to their financial development. How can Basel III be made to work for EMDEs? A new CGD Task Force report makes several recommendations.
For the 28 jurisdictions that are members of the Basel Committee on Banking Supervision, adopting Basel banking standards is a given. But why are some non-member developing countries embracing the reforms when they don’t have to? The answers vary by country, but the final lesson is that regulators should carefully evaluate the advantages and disadvantages of adopting Basel regulations in whole or in part for their nation’s unique situation.