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CRISIS REGULATION DEMAND

By Mohammad Jaradat and Marius M. Motocu

Abstract

This paper argues and identifies in its previous part the main hallmarks of the crisisas too-big-to-fail institutions that took on too much risk, insolvency resulting from contagion andcounterparty risk, the lack of regulatory and supervisory integration, and the lack of efficientresolution regimes. Then this article looks at how the Basel III proposals address these issues,helping to reduce the chance of another crisis like the current one. The Basel III capital proposalshave some very useful elements, notably a leverage ratio, a capital buffer and the proposal to dealwith pro-cyclicality through dynamic provisioning based on expected losses. However, this articlealso identifies some major concerns.crisis, capital buffer, leverage ratio, pro-cyclicality, liquidity coverage ratio.

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