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michel barnier critiques basel peer review October 1, 2012

Posted by Bradley in : financial regulation , trackback

The Basel Committee has published assessments of the levels of compliance of the EU, Japan, and the US with Basel III. The reports are characterized as preliminary assessments. Nevertheless, Michel Barnier had some problems with the EU report:

In 12 out of 14 areas of the preliminary “Regulatory Consistency Assessment” concerning the EU published by the Basel Committee today, the draft European legislation has been fairly assessed to be “compliant” or “largely compliant”. I have, however, reservations about the preliminary findings in the remaining two areas, which do not appear to be supported by rigorous evidence and a well-defined methodology. I believe that this has led to an apparently significant lack of consistency in the way judgement and gradings have, in this preliminary phase, been applied in those two areas across jurisdictions. The European Commission and the European members of the Basel Committee have provided extensive information and clarifications to the Basel Committee during the process, but unfortunately this has only been partially reflected in this present preliminary report. Here at the Commission, we stand ready to support the further work by the Basel Committee to improve its assessment of standards implementation and are confident that the final report of the Basel Committee will constitute an improvement both in the assessment of the EU and in the coherence across jurisdictions.

There is more detail in the press release. As this sort of peer review process is becoming a more visible component of the transnational standards process (I am working on a paper on this topic focusing on the FSB’s peer reviews) the questions Barnier raises about methodology are important.

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