Developing countries navigating global banking standards
- Basel II and III adoption in developing countries is widespread but selective. Financial regulators in LMICs vary widely regarding how many and which components of Basel standards they adopt and implement.
- Three key actors shape Basel standards adoption: regulators, politicians, and domestic banks. Our research shows that global banks and international financial institutions such as the World Bank and IMF exert less direct pressure on domestic stakeholders than previously assumed, albeit with important exceptions.
- Each group of actors is drawn to Basel II and III for different reasons. For example, politicians may seek to attract foreign investors, regulators internalise global standards as best practices to safeguard against financial instability, and domestic banks seek reputational benefits to facilitate their expansion abroad. The orientation of stakeholders and the interrelations among them shape to what extent Basel standards are formally adopted and actually implemented.
- We distil six ideal types of Basel adoption from our empirical research. Each ideal type features a unique constellation of actors with their respective orientations, which shapes regulatory decisions, ranging from complete rejection to a full embrace of Basel II and III.