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Abstract In December 2009, the Basel Committee on Banking Supervision submitted a proposal for a reform of the regulation of capital requirements for banks in the wake of financial crises of 2007/2008. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, we call for a systematic analysis of why the existing system of capital regulation has failed so miserably in the crises. We point out in this paper, because of the complexity of the financial systems，and because there are many inherent defects in risk measurement models, the basic assumption implied by “Basel II” and by “Basel III” that financial risks can be measured accurately if we use advanced models is just an illusion. When the current system of risk-calibrated capital requirements, in particular under the model-based approach is adopted, and when financial risks have not be measured accurately, the higher capital requirements will only arouse more motivation of banks to regulatory arbi
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Received: 23 July 2012
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Corresponding Authors:
PENG Shou kang
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2013, Vol. 1 
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