ABSTRACT
Chapter 3 analyzes the evolution of prudential banking regulation. It shows how a government network, the Basel Committee, was able to forge consensus on macroprudential issues that were barely debated prior to the crisis. Furthermore, the chapter argues that the main reason for the successful implementation of Basel III is that it largely eschews legislative interference. The one jurisdiction that provided parliament with a major role in implementing Basel III, the European Union, has failed the regulatory consistency test that is part of the Basel Committee peer review process. The empirical record is then tested against five alternative explanations.
