In contrast to its Japanese and Korean counterparts, the Taiwanese regulatory authority adopted the Basel Accord with the intention of using it to strengthen banking sector soundness. As a result, initial Taiwanese compliance with the Accord was more effective than that seen in Japan or Korea. Taiwanese banks’ formal compliance was attributable largely to enforcement by the domestic regulatory authority, although external compliance pressures did also give banks incentives to comply. The country’s compliance gradually became cosmetic from the mid-1990s onward, however, a result mainly of systemic capacity problems generated largely by domestic politics.