Implications of Basel II for financial stability. Clouds are darker for developing countries

Placing Basel II in the perspective of the more general trend in financial regulation, the paper analyses its efficacy and efficiency as a device to foster financial resiliency. In assessing the criticisms levelled against the New Accord, special attention is devoted to the case of the emerging countries. I suggest that Basel II is neither a sufficient, nor a necessary condition to attain systemic financial stability, especially in weak institutional and macro-policy environments. Taking also into account just how complex and onerous the scheme is, I conclude that the emerging countries should look for new international institutional arrangements based on the principle of astability level playing field.