Quillin, Bryce Ramsey
(2004)
The effects of international soft law on state behaviour: Understanding degrees of compliance with the Basel Accord, 1988-2000.
PhD thesis, London School of Economics and Political Science.
Abstract
The thesis provides a comprehensive examination of the impact of the 1988 Basel Accord on the capital adequacy regulations of developed economies. The study seeks to understand if the Accord affected broad or isolated convergence of 18 developed states' bank credit risk regulations from 1988 to 2000, and understand what political economic variables influenced levels of regulatory isomorphism. The thesis argues that previous research has failed to effectively address whether the Accord accomplished its "level regulatory playing field" objective by employing small sample sizes. In order to address this lacuna, the thesis creates a quantitative database of developed states' interpretations of the Basel rules. The results indicate that the Accord may have successfully provided a regulatory floor as most states implemented the agreement in some form by 1991. Yet, some persistent distinction remained in the way states implemented the Accord. Second, the thesis aims to understand why convergence emerged among a subset of states, yet not others, by testing a battery of political economic explanations. Statistical tests reveal that initial interpretations of the Accord's provisions were conditioned by the severity of a state's capital adequacy regime prior to 1988. States with weak (severe) pre-Basel capital adequacy regimes tended to implement weak (severe) interpretations of the Accord. Departures from "path dependent" positions resulted mostly from the presence of acute banking crises and the impact of private financial market influences. The qualitative studies of implementation in the United States, France, Germany, and Japan tend to support the quantitative finds, yet also emphasize the importance of considering tax, accounting, and loan-loss provisioning policies in assessments of capital adequacy regulation. These results should have implications for revised studies of the economic effects of the Accord and studies of possible impact of the Basel 2 Accord.
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