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

Drach, A. (2020) Supervisors against regulation? The Basel Committee and country risk before the International Debt Crisis (1976-1982). Financial History Review, 27(2), pp. 210-233. (doi: 10.1017/S0968565020000050)

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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.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Drach, Dr Alexis
Authors: Drach, A.
College/School:College of Social Sciences > Adam Smith Business School > Management
Journal Name:Financial History Review
Publisher:Cambridge University Press
ISSN:0968-5650
ISSN (Online):1474-0052
Published Online:25 June 2020
Copyright Holders:Copyright © 2020 European Association for Banking and Financial History e.V.
First Published:First published in Financial History Review 27(2):210-233
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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