Since its inception in 1984, the Basel regime has been imposing an incredible array of requirements on the banking industry including an increasingly onerous capital charge, followed by liquidity charge and then more capital slapped on an operational charge. As the industry becomes increasingly digital, the risks it faces becomes insurmountable. As the experience of Silicon Valley Bank showed, a bank run on deposits can be over in seconds, not days. So, how is the Basel regime going to ensure the safety and soundness of financial institutions going forward. It can’t just be slapping on more capital charge when the problems faced are fundamentally different from those in the past, which were very balance sheet centric.
In this podcast interview, I turned to Professor Moorad Choudhry, who has made a living teaching banks how to navigate the existing Basel regime and asked him to pontificate with me on what the future of the Basel regime should or would look like.
