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Supervisors against regulation? The Basel Committee and country risk before the International Debt Crisis (1976–1982)

Published online by Cambridge University Press:  25 June 2020

Alexis Drach
Alexis Drach*
Affiliation:
University of Glasgow
*
Dr Alexis Drach, University Avenue, GlasgowG12 8QQ, UK, email: [email protected].
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Abstract

While the International Debt Crisis of the early 1980s was the most severe financial crisis since World War II and while national and international banking supervision was developing at that time, little is known about the response of supervisors to the deteriorating financial environment in the years preceding the crisis. Complementing the political and business history of the international debt situation, this article aims to unravel the international banking supervision side of the question. Based on archival material from the Bank for International Settlements (BIS) and various central banks, the article examines how the Basel Committee on Banking Supervision (BCBS), then emerging as the leading forum on international banking supervision, anticipated the International Debt Crisis through the prism of ‘country risk’. The article shows that the Committee refused to recommend strict regulations in this area. It argues that members adopted this position because of the lack of good information and the difficult position of banking supervision between macroeconomic issues and individual banks’ own responsibilities, but also because of somewhat excessive faith in market mechanisms. Their discussions on country risk shed light on critical challenges of banking supervision and, thereby, on the history of banking regulation and prudential thinking.

Keywords

Basel Committee on Banking Supervisioncountry riskInternational Debt Crisisfinancial regulation

JEL classification

E50: General F34: International Lending and Debt Problems N8: Micro-Business History N40: General, International, or Comparative N20: General, International, or Comparative
Type
Articles
Information
Financial History Review , Volume 27 , Issue 2 , August 2020 , pp. 210 - 233
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Copyright
Copyright © European Association for Banking and Financial History e.V. 2020

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Footnotes

I would like to thank Youssef Cassis, Neil Rollings, Valerio Cerretano and two anonymous reviewers for their constructive and helpful comments.

References

Sources

Archives historiques de la Banque de France, Paris.Google Scholar
Federal Reserve Bank of New York Archives, New York.Google Scholar
Bank of England Archives, London.Google Scholar
Archives of the Bank for International Settlements, Basel.Google Scholar

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