Sovereign Debt, the Basel Accord, and International Financial Hierarchy

• In Event: The Political Economy of the Global Financial System

Abstract

From the late 1980s to the mid-2000s, the Basel Committee on Banking Supervision (BCBS) regulated the creditworthiness of states across the globe through an agreement known as the Basel Accord. The Basel Accord – transposed in the regulation of states hosting the world’s main financial centres – decreed that the sovereign debt of OECD states was riskless, while that of all non-OECD countries was equally risky. This regulation with massive distributional consequences, effectively favoured countries like Mexico and Greece, while penalising places like Hong Kong. Why? Unfortunately, the existing literature does not provide an answer. Based on research in the archives of the Basel Committee, this paper attempts to solve the puzzle and thus, to shed light on the making of a regulation that profoundly affected the flow of international capital up to the financial crisis of 2008.

Author

• Quentin Bruneau, New School for Social Research