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October 2018

Can bank capital substitute for supervision and oversight?

Asli Demirgüç-Kunt's picture

Since its inception, bank capital regulation has been a topic of heated discussion and debate. At the international level, the Basel Committee on Banking Supervision (BCBS) has emerged as a global standard setter for regulation of banks. Starting with the first Basel accord in 1988, common capital targets were established to strengthen banks’ capital cushions and to ensure a level playing field at the international level.  These target capital ratios were designed to be the same across countries, without taking into consideration variations in local market conditions.