Impact of the 1988 Basle Accord on International Banks

  • Author(s): JOHN D. WAGSTER
  • Published: Apr 30, 2012
  • Pages: 1321-1346
  • DOI: 10.1111/j.1540-6261.1996.tb04071.x

ABSTRACT

The ostensible purpose of the Basle Accord was to standardize bank‐capital regulations among the twelve leading industrial countries. Its ulterior goal was to “level the playing field” by eliminating a funding‐cost advantage of Japanese banks that had allowed them to capture more than one‐third of international lending. The wealth gain for Japanese bank shareholders was 31.63 percent. Wealth effects for shareholders of non‐Japanese banks were not significant. These results suggest that the Basle Accord did not eliminate the pricing advantage of Japanese banks, challenging the non‐Japanese regulators' contention that the regulation would help level the playing field.

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