Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-22T15:59:58.908Z Has data issue: false hasContentIssue false
  • English
  • Français

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].
Get access Rights & Permissions [Opens in a new window]

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
Check for updates
Copyright
Copyright © European Association for Banking and Financial History e.V. 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

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

References

Aikman, D., Haldane, A. and Kapadia, S. (2013). Operationalising a macroprudential regime: goals, tools and open issues. Estabilidad Financiera, 24, pp. 9–30.Google Scholar
Altamura, C. (2017). European Banks and the Rise of International Finance: The Post-Bretton Woods Era. London and New York: Routledge.Google Scholar
Altunbaş, Y., Gadanecz, B. and Kara, A. (2006). The evolution of syndicated loan markets. The Service Industries Journal, 26, pp. 689–707.CrossRefGoogle Scholar
Alvarez, S. (2015). The Mexican debt crisis redux: international interbank markets and financial crisis, 1977–1982. Financial History Review, 22, pp. 79–105.CrossRefGoogle Scholar
Bartel, F. (2017). Fugitive leverage: commercial banks, sovereign debt, and cold war crisis in Poland, 1980–1982. Enterprise & Society, 18, pp. 72–107.CrossRefGoogle Scholar
Bátiz-Lazo, B. (2018). Cash and Dash: How ATMs and Computers Changed Banking. Oxford: Oxford University Press.CrossRefGoogle Scholar
Bátiz-Lazo, B. and Wood, D. (2002). An historical appraisal of information technology in commercial banking. Electronic Markets, 12, pp. 192–205.CrossRefGoogle Scholar
Battilossi, S. (2010). The eurodollar revolution in financial technology: deregulation, innovation and structural change in western banking. In Kyrstis, A.-A. (ed.), Financial Markets and Organizational Technologies: System Architectures, Practices and Risks in the Era of Deregulation. London: Palgrave Macmillan.Google Scholar
Boey, M. (2014). Regulating ‘bankerspace’: challenging the legitimacy of the Basel Accords as soft law. Southern California Law Review, 87, pp. 74–119.Google Scholar
Busch, A. (2008). Banking Regulation and Globalization. Oxford: Oxford University Press.CrossRefGoogle Scholar
Capie, F. (2010). The Bank of England: 1950s to 1979. New York: Cambridge University Press.CrossRefGoogle Scholar
Cassis, Y. (2006). Capitals of Capital: A History of International Financial Centres, 1780– 2005. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Cassis, Y. (2011). Crises and Opportunities, 1890–2010: The Shaping of Modern Finance. Oxford: Oxford University Press.CrossRefGoogle Scholar
Clement, P. (2010). The term ‘macroprudential’: origins and evolution. BIS Quarterly Review, pp. 59–67.Google Scholar
Davies, H. (2015). Can Financial Markets Be Controlled? Cambridge and Malden, MA: Polity Press.Google Scholar
Dawson, F. G. (1990). The First Latin American Debt Crisis: The City of London and the 1822–25 Loan Bubble. New Haven, CT: Yale University Press.Google Scholar
Deeg, R. and O'sullivan, M. (2009). The political economy of global finance capital. World Politics, 61, pp. 731–63.CrossRefGoogle Scholar
Devlin, R. (1989). Debt and Crisis in Latin America: The Supply Side of the Story. Princeton, NJ: Princeton University Press.Google Scholar
Drach, A. (2019). A globalization laboratory: European banking regulation and global capitalism in the 1970s and early 1980s. European Review of History: Revue Européenne d'histoire, 26, pp. 658–78.CrossRefGoogle Scholar
Eichengreen, B. (2002). Financial Crises: And What to Do about Them. Oxford: Oxford University Press.CrossRefGoogle Scholar
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). (1997). History of the Eighties: Lessons for the Future, vol. 1: An Examination of the Banking Crises of the 1980s and Early 1990s. Washington, DC: Federal Deposit Insurance Corporation.Google Scholar
Feiertag, O. and Drach, A. (2018). Le sens de la mondialisation: surveillance bancaire et globalisation financière du xxe au xxie siècle. Monde(s), 13, pp. 133–54.Google Scholar
Giddey, T. (2012). Gendarme ou médecin des banques? Les premières années d'activité de la Commission Fédérale Des Banques (1935–1943). Traverse, pp. 145–63.Google Scholar
Gigliobianco, A. and Toniolo, G. (eds.) (2009). Financial Market Regulation in the Wake of Financial Crises: The Historical Experience. Rome: Banca d'Italia.Google Scholar
Goodhart, C. (2011). The Basel Committee on Banking Supervision: A History of the Early Years, 1974–1997. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
James, H. (1996). International Monetary Cooperation since Bretton Woods. Washington, DC, and New York: International Monetary Fund and Oxford University Press.Google Scholar
Kapstein, E. (1994). Governing the Global Economy: International Finance and the State. Cambridge, MA: Harvard University Press.Google Scholar
Katada, S. N. (2008). Japan's role in Latin America's debt management, 1982–1991. In Hirata, K. and Sato, Y. (eds.), Norms, Interests, and Power in Japanese Foreign Policy. New York: Palgrave Macmillan.Google Scholar
Kershaw, P. V. (2018). Averting a global financial crisis: the US, the IMF, and the Mexican debt crisis of 1976. International History Review, 40, pp. 292–314.CrossRefGoogle Scholar
Krayenbuehl, T. (1985). Country Risk: Assessment and Monitoring. Lexington, MA: Lexington Books.Google Scholar
Kobrak, C. and Troege, M. (2015). From Basel to bailouts: forty years of international attempts to bolster bank safety. Financial History Review, 22, pp. 133–56.CrossRefGoogle Scholar
Maes, I. (2011). Alexandre Lamfalussy et les tentatives de la BRI pour éviter un endettement excessif en Amérique latine dans les années 1970. Histoire, économie & société, 30, pp. 59–77.CrossRefGoogle Scholar
Malik, H. (2018). Bankers and Bolsheviks: International Finance and the Russian Revolution. Princeton, NJ: Princeton University Press.Google Scholar
Marichal, C. (1989). A Century of Debt Crises in Latin America: From Independence to the Great Depression, 1820–1930. Princeton, NJ: Princeton University Press.Google Scholar
Mitchener, K. and Jaremski, M. (2015). The evolution of bank supervisory institutions: evidence from American states. Journal of Economic History, 75, pp. 819–59.CrossRefGoogle Scholar
Monnet, E. (2018). Controlling Credit: Central Banking and the Planned Economy in Postwar France, 1948–1973. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Mourlon-Druol, E. (2015). ‘Trust is good, control is better’: the 1974 Herstatt bank crisis and its implications for international regulatory reform. Business History, 57, pp. 311–34.CrossRefGoogle Scholar
Mourlon-Druol, E. (2016). Banking union in historical perspective: the initiative of the European Commission in the 1960s–1970s. JCMS: Journal of Common Market Studies, 54, pp. 913–27.Google Scholar
Portes, R. (1982). La crise polonaise et les relations économiques Est-Ouest. Politique Étrangère, 47, pp. 75–89.CrossRefGoogle Scholar
Schenk, C. (2010). The regulation of international financial markets from the 1950s to the 1990s. In Battilossi, S. and Reis, J. (eds.), State and Financial Systems in Europe and the USA: Historical Perspectives on Regulation and Supervision in the Nineteenth and Twentieth Centuries. Farnham and Burlington, VT: Ashgate.Google Scholar
Schenk, C. (2014). Summer in the city: banking failures of 1974 and the development of international banking supervision. English Historical Review, 129, pp. 1129–56.CrossRefGoogle Scholar
Singer, D. (2010). Regulating Capital: Setting Standards for the International Financial System. Ithaca, NY: Cornell University Press.Google Scholar
Singleton, J. (2011). Central Banking in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Sy, A. N. R. (2003). Rating the rating agencies: anticipating currency crises or debt crises? IMF Working Papers.CrossRefGoogle Scholar
Tarullo, D. (2008). Banking on Basel: The Future of International Financial Regulation. Washington, DC: Peterson Institute.Google Scholar
Toniolo, G. (2005). Central Bank Cooperation at the Bank for International Settlements, 1930–1973. New York: Cambridge University Press.Google Scholar
Toniolo, G. and White, E. (2015). The evolution of the financial stability mandate: from its origins to the present day. NBER (National Bureau of Economic Research) Working Paper.CrossRefGoogle Scholar
Toksöz, M. (2014). The Economist Guide to Country Risk: How to Identify, Manage and Mitigate the Risks of Doing Business across Borders. London: Profile Books.Google Scholar
Véron, N. (2015). Europe's radical banking union. Bruegel Essay and Lecture Series. Brussels: Bruegel.Google Scholar
Wood, D. (2005). Governing Global Banking: The Basel Committee and the Politics of Financial Globalisation. Aldershot: Ashgate.Google Scholar