Why is the set of rules like the Basel II blamed as the cause for the...

Why is the set of rules like the Basel II blamed as the cause for the global financial meltdown?

Expert Solution

Set of rules like Basel II are blamed as a cause of global financial meltdown as they are very stringent kind of laws and their applicable to even small organisations who are not able to keep up with their capital requirement because they are organisation which will thrive on the growth but these requirements are always intending to put a control over their growth prospects, So, at the time of the crisis, these smaller organisations are not able to survive and sustain because their business is too small to survive any kind of economic recession.

These statutory requirements are related to Capital maintenance and capital adequacy ratio so various organisations which would have lended those capital are not able to lend because of this restriction and they also lose upon a lot of their opportunity, and these laws are highly rigid in nature so they can never be flexible to the various financial organisation and has it can cause tremendous pressure at the time of recession so these regulation are believed to be one of the major cause for financial crisis .

jeff jeffy answered 1 year ago

Basel II was a response to shortcomings in the original Basel Accord (Basel I, 1988). In...

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