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Originally Posted by Undertoad
Basel 2 was adopted in America in November 2007.
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Too late. The current meltdown started in mid 2007 and slowly picked up momentum. Basel 2 only one year ago was too late to cause finance industry to remeasure and adjust equity. There are $trillion of contracts. Banks suddenly adjusted their liquidity profile to meet all those obligations? Obviously not. Basel 2 was not implemented except in a press release.
With that Nov 2007 announcement, banks had to implement a complex and detailed plan. Then followed by four quarters of trying to implement that plan. That plan was to be submitted by May 2008 and fully implemented by May 2009. The tumbling financial industry was already obvious in June 2008. IOW Basel 2 still was not implemented. Only planning for Basel 2 existed - too little too late.
Basel 2 was only implemented in a government announcement meaning that UT is wrong.
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... specifically plans for those banks not subject to the advanced approaches of Basel II.
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Government then exempted many banks from Basel 2 on a theory that these banks were using more sophisticated risk management programs and had more complex risk structures. Therefore these banks did not need to meet Basel 2. What do we know? Those with most complex structures were at greatest risk. Those with large capital reserves - who best met Basel 2 - were at least risk.
UT tells us they had already implemented Basel 2. Hardly. They were not even planning to implement Basel 2 when this economic meltdown started gaining momentum. Basel 2 was only implemented officially. In reality - too little and too late. Posted was
reality. American banks did not meet Basel 2.