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Basel III and the Strengthening of Capital Requirement: The obstinacy in mistake or why “it” will happen again

Bernard Vallageas

Abstract

Since the financial liberalisation of the 80’s, the Basel committee on Banking Supervision wants to strengthen banks’ capital and other stable funding with the purpose of increasing banks’ financial security, as stable funding increases the security of the non-financial business sector. But bank capital has nothing to do with bank security and with money creation. It is shown, instead, that increasing banks’ stable funding entails a decreasing of the stable funding for the rest of the economy and securitization. Thus this strengthening is harmful and the way for the financial sector to work in the interest of the economy is to separate deposit banks and other financial institutions, to strengthen banks’ control and to recognize they do not need capital, and therefore no owners.

Published on 7 Feb 2013 in World Social and Economic Review No 2, 2013