Regulators pine for the simple life
Prudential regulation is too complicated, the Basel Committee has conceded - but that does not mean it will embrace an all-powerful leverage ratio. By Duncan Wood
The contest between risk-based capital and the leverage ratio pits complexity against simplicity, with all the pros and cons that usually define that contest: things that are simple can be easily understood and compared, but those advantages may not be worth much if they communicate something wrong or misleading.
It’s the job of the Basel Committee on Banking Supervision to strike the right balance in the prudential framework – and the committee admitted in a July discussion paper that the
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