Basel alone can’t stop next cri­sis or fool­ish be­hav­iour

Townsville Bulletin - - Investor -

MOVES to re­form the i nter­na­tional f i nan­cial sys­tem can’t stop b a n k s f r o m t a k i n g silly risks and won’t guar­an­tee that a fi­nan­cial cri­sis wouldn’t hap­pen again, the Re­serve Bank of Aus­tralia says.

RBA As­sis­tant gov­er­nor ( fi­nan­cial sys­tem) Mal­colm Edey says the Basel III re­forms – a new set of in­ter­na­tional stan­dards for banks – need to be cou­pled with re­spon­si­ble be­hav­iour, to avoid a re­peat of the global fi­nan­cial cri­sis.

‘‘ There’s also more to fi­nan­cial sta­bil­ity than just hav­ing good reg­u­la­tions,’’ Mr Edey said yes­ter­day.

‘‘ The best pos­si­ble set of reg­u­la­tions won’t, on its own, stop the next cri­sis, for the sim­ple rea­son that ev­ery cri­sis is dif­fer­ent, peo­ple in­no­vate around

Edey reg­u­la­tions, and you can’t against fool­ish be­hav­iour.

‘‘ We need bankers and in­vestors who don’t take silly risks, su­per­vi­sors who are pre­pared to ask tough ques­tions and step in when they see ex­cess, and good-qual­ity im­ple­men­ta­tion of the rules that we al­ready have.’’

Mr Edey noted that Aus­tralia had been well served by its pru­den­tial reg­u­la­tor on that front.

‘‘ But it would be a shame if, in the in­ter­na­tional de­bate, those ba­sics got lost in all the fo­cus on re-writ­ing the rules.’’

One of the pro­pos­als for the Basel com­mit­tee is to ad­dress the lack of liq­uid­ity many banks faced dur­ing the worst of the fi­nan­cial cri­sis.

One of the Basel III pro­pos­als is to in­tro­duce a stan­dard for liq­uid­ity risk that aims to en­sure that banks have suf­fi­cient high qual­ity liq­uid as­sets such as gov­ern­ment bonds.

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