This study examines the role of the Basel Accords—a set of international standards regulating bank capital—in the global financial crisis. It argues that because the accords were so widely adopted, they effectively homogenized the banking industry, increasing the systemic risk they were intended to prevent.

Engineering the Financial Crisis
Systemic Risk and the Failure of Regulation

Jeffrey Friedman and Wladimir Kraus

2011 | 224 pages | Cloth $45.00
Economics | Public Policy
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Table of Contents

List of Figures and Tables
Glossary of Abbreviations and Acronyms

Introduction
1 Bonuses, Irrationality, and Too-Bigness: The Conventional Wisdom About the Financial Crisis and Its Theoretical Implications
2 Capital Adequacy Regulations and the Financial Crisis: Bankers' and Regulators' Errors
3 The Interaction of Regulations and the Great Recession: Fetishizing Market Prices
4 Capitalism and Regulation: Ignorance, Heterogeneity, and Systemic Risk
Conclusion

Appendix I. Scholarship About the Corporate-Compensation Hypothesis
Appendix II. The Basel Rules off the Balance Sheet
Notes
References
Index
Acknowledgments