Throwing the Basel III Baby Out With the Bathwater

Despite Criticism, New Financial Rules Still Useful for Banks

As a "Bring down Basel III" media chorus grows louder, it's important to fully understand any regulatory framework changes and remember that no system is perfect, industry consultant Mayra Rodriguez Valladares said.

Basel III rules, the tighter restrictions on derivatives and capital requirements adopted earlier this year by the Basel Committee on Banking Supervision, are a "very useful tool to improve banks' risk management," but not the only tool, Valladares wrote in a new report.

Citing a recent editorial in The Wall Street Journal that criticized Basel III, Valladares said it is "incumbent that everyone brings down the shrillness over the debate of capital requirements and financial sector reform… We need a healthy banking sector in order to have a healthy financial sector, not mention a strong economy."

Valladares, a CME Group featured contributor, is managing principal with MRV Associates, a New York based capital markets and financial regulatory consulting firm.

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