Regulations are the scourge of banks, which is why The Banker’s Reg Rage column is one of the best read parts of the magazine (see page 200). Even so, the scale of assault on Basel II in the wake of the crisis seems unprecedented. John Plender, a columnist for the Financial Times, questions the entire development of securitisation and the “originate and distribute” model which has grown up in the past decade. Pushpam Chatterjee, a Deloitte-Touche consultant, worries about banks all using their own individual models to assess risk.
Basel II is the basic building block of bank regulation and it would be surprising if the current crisis is sufficiently devastating to regard it as a total failure. There are, however, some big questions about the contingent risks of securitisation and it is difficult to believe that Basel II addresses all of them. In the current crisis, ‘off-balance sheet’ only seemed to mean ‘temporarily off-balance sheet’. That needs to be looked at.
