The Dodd-Frank Act and Basel III : Intentions, Unintended Consequences, and Lessons for Emerging Markets
ï»¿ï»¿This paper is an attempt to explain the changes to finance sector reforms under the Dodd-Frank Act in the United States and Basel III requirements globally; their unintended consequences; and lessons for currently fast-growing emerging markets concerning finance sector reforms, government involvement in the finance sector, possible macroprudential safeguards against spillover risks from the global economy, and, finally, management of government debt and fiscal conditions. The paper starts with a summary of reforms under the Dodd-Frank Act and highlights four of its primary shortcomings. It then focuses on the new capital and liquidity requirements under Basel III reforms, arguing that, like its predecessors, Basel III is fundamentally flawed as a way of designing macroprudential regulation of the finance sector. In contrast, the Dodd-Frank Act has several redeeming features, including requirements of stress-test-based macroprudential regulation and explicit investigation of systemic risk in designating some financial firms as systemically important. It argues that India should resist the call for blind adherence to Basel III and persist with its (Reserve Bank of India) asset-level leverage restrictions and dynamic sector risk-weight adjustment approach. It concludes with some important lessons for regulation of the finance sector in emerging markets based on the global financial crisis and proposed reforms that have followed in the aftermath.
|Date of creation:||Oct 2012|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:eab:govern:23352. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.