Mind the Gap: Making Basel Standards Work for Developing Countries
By Thorsten Beck, Emily Jones, and Peter Knaack
International banking regulations are developed by a small group of financial regulators, largely from advanced economies. Off-the shelf adoption of these standards in developing countries, particularly low and lower-middle income countries, poses substantial costs and risks. Yet many regulators are pressing ahead with them nevertheless, partly due to concerns about reputation and competition. We explain why, in today’s world of globalised finance, regulators cannot simply ignore international standards, even if they are ill-suited to their regulatory environment. We propose ways that the international policy community can move from a minimalist ‘do no harm’ approach, to actively designing international standards that are genuinely useful for low and lower-middle income countries and support financial sector development.