Deputy general manager of BIS says Basel II is key to financial globalisation and market discipline

Hervé Hannoun, deputy general manager of the BIS, has reviewed some of the main factors driving the internationalisation of financial services. Looking at the key challenges facing central banks in acting as a discipline multiplier, “Internationalisation of financial services: implications and challenges for central banks” also examined the benefits of market discipline in support of policy discipline.

Despite the initial expense and effort, Basel II standards lower the cost of obtaining and analysing information and strengthen the stability of the financial system. The three-pillar framework encourages prudential supervision across countries. At the same time, the system is flexible enough to allow countries to tailor the framework to suit the specificities of their financial system.

Hannoun stated that “Basel II provides for a better alignment of regulatory capital requirements with the