Which is something that Peter Wallison pointed out back in 2006, that Basel II actually weakened American banking's capital structure;
The international bank capital accord proposal known as Basel II is a statistical and probabilistic effort to replicate what the market would do if government regulation had not interfered with market discipline. The proposal has many flaws, and a recent test suggested that it would reduce bank capital requirements substantially below current U.S. levels.Advantage, Mr. Wallison. He proposed a remedy;
In other areas, formulas and mathematical models have failed to represent the real world accurately; there is little reason to believe that a model of how the market might assess bank risk would be any more successful. A leverage ratio seems essential, at least as a stopgap measure, but a better idea would be to use a special kind of subordinated debt to discover the market’s perception of a bank’s risk position.Game, set, match to the man from AEI.