Basel and Securitization: Conflicting Incentives and Rationales
DOI:
https://doi.org/10.18041/0121-3474/verbaiuris.33.24Keywords:
Basel, Incentives, Securitization, Rationales, Leverage, Venture capital, Risk qualifiers, Rational agent, Liquidity, Systemic risk, Credit riskAbstract
The financial crisis presented in 2007 has a number of similar factors with the 1929 crisis; an environment of economic deregulation preceded both. There are in banking systems a series of incentives and rationales that, depending on the position occupied in the financial market, are constantly in conflict with the regulation and with the principles set out in Basel for the proper functioning of the system.
Consequently under the creation of new mechanisms, such as the securization or the futures market, the incentives will greatly influence the financial market actors, to not comply with their obligations (Basel I, II, and III), because they could achieve greater profit for them and for the institutions they work for. Therefore the measures contained in Basel III, as a reaction from the financial crisis (based primarily on increasing risk capital and reduce leverage), could if not accompanied by an effective policy control, will not be efficient in the long term to control the market, so may be a new economic crisis will occur.
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References
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