Regulation and bank supervision: Do we need a Basel III?

The Basel II rules were not able to prevent the financial crisis. Is a Basel III necessary? Franz-Christoph Zeitler, German Bundesbank, points out that despite widespread public opinion public far-reaching consequences have already been drawn regarding the weaknesses in bank regulation that become apparent in the crisis; these will be incorporated into German national law by the end of 2010. The goal is a stricter and higher equity capital requirement for the institutions, which, because of a higher liability amount for the owner and a lower loan capital leverage should contribute to more caution and thus to more system stability. Bernd Rudolph, University of Munich, poses the question of whether "not too much of a good thing has been done" and whether there is not the threat of over-regulation, which, among other things, may weaken the efforts of many banks to work on their own "sensible" risk management and an effective limitation of the risks they have assumed. For Christian Kirchner, Humboldt University, Berlin, Basel III can be a step in the right direction towards improving the stability and the effectiveness of the international financial markets. The individual regulation instruments, however, only cover a relatively small portion of the necessary reforms and should therefore not be viewed in isolation but analysed in the context of other complementary and substitutive regulation approaches. In the opinion of Christoph Kaserer, Technical University of Munich, a mere adaptation of the Basel II system of rules would change nothing with regard to the fundamental weaknesses of the structure of bank supervision. Instead a fundamental new direction of the regulation approach is needed. In the viewpoint of Markus Ferber, European Parliament, a revision of the Basel equity rules for banks is not the solution to all the problems. He supports the demands for European financial market supervision.