Beyond Basel

“I ALWAYS have concerns about banks,” laments one European finance minister, “It’s part of my job description.” As Europe’s economies drag themselves back out of recession, a common refrain from politicians and industrialists is that their economies are being slowed by ailing banks. Mountains of bad debts, many not yet written off, and the resulting shortage of capital are restricting the flow of credit to the rest of the economy. The response of many European bank regulators has been to look the other way in the hope that forbearance and time will revive their banks.