Implementation of Basel III in the U.S. will bring back the regulatory arbitrage problems under Basel I

NY StockExchange LOGO A view of the entrance to the New York Stock Exchange, June 2010.
Rejigging financial regulation is in vogue. But, in the world of international finance, how well do different regulatory systems join up? Takeo Hoshi argues that the U.S. Dodd Frank Act and Basel III are, in part, incompatible and that harmonising them may lead to unintended consequences. The U.S. ought to tread carefully here but should also try hard to maintain the spirit of better financial regulation.