The political economy of the negotiation of the 1988 Basel Accord as a soft law agreement

The 1988 Basel Accord established an extraordinary international financial regime. Though negotiated by the G-10 states, and Luxembourg and Switzerland, the Accord had been implemented in over 100 countries by the late 1990s.1

This diffusion of the Basel capital adequacy standard proceeded in developed and developing economies despite the absence of an enforcement mechanism or a systematic political effort to encourage the Accord’s wide-spread adoption.2

Though bankers and economists have criticized the Accord since its inception, it has become a qualitative and quantitative standard that financial services regulators worldwide want to be seen to be enforcing, and with which banks want to be in compliance.3