Financial safety nets are incomplete social contracts that assign responsibility to various economic sectors for preventing, detecting, and paying for potentially crippling losses at financial institutions. This paper uses the theories of incomplete contracts and sequential bargaining to interpret the Basel Accords as a framework for endlessly renegotiating minimal duties and standards of safety-net management across the community of nations. Modelling the stakes and stakeholders represented by different regulators helps us to understand that inconsistencies exist in prior understandings about the range of sectoral effects that the 2004 Basel II agreement might produce. The analysis seeks to explain why, in the U.S., attempting to resolve these inconsistencies has spawned an embarrassingly fractious debate and repeatedly pushed back Basel II's scheduled implementation.
Published: Edward Kane, 2007. "Basel II: A Contracting Perspective," Journal of Financial Services Research, Springer, vol. 32(1), pages 39-53, October.
This paper is available as PDF (235 K) or via email.
This paper was revised on March 26, 2007
Acknowledgments
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
