World Needs Tougher Financial Rules

THE JOB OF re-regulating the financial system is only partly done. The United States has passed a bill, but new international rules remain to be written. As we have noted, nothing is more important to assuring financial stability than strong standards for bank capital -- the reserves institutions must set aside to maintain solvency in times of economic stress. The task of setting capital standards for global banks, and ensuring that they apply roughly equally around the world, falls to the representatives of leading nations who make up the Basel Committee on Banking Supervision, based in Switzerland. With its rules, known as Basel II, having been exposed as too lax, the Basel group has promised to produce tougher ones by November, when leaders of the world's 20 top economies meet in Seoul. The problem is that banks are trying to water down the forthcoming Basel III accords.