How banking regulation has grown out of all proportions: Basel regulatory framework have now more than two million words

How banking regulation has grown out of all proportions. Marie-José Kolly and Jürg Müller. The End of Banking, May 22 2018. https://www.endofbanking.org/2018/05/22/how-banking-regulation-has-grown-out-of-all-proportions

Over the last forty years, banking regulation has grown extensively. The framework developed by the Basel Committee on Banking Supervision alone consists of two million words. What is actually stated in all these documents?

A bank fails, and politicians save it with taxpayers’ money. This story repeats itself all around the world, most recently in Russia and Italy. To prevent such costly bailouts, banking regulation has been devised and implemented for a long time. The documents of the Basel Committee on Banking Supervision play a key role for national rules.

The Neue Zürcher Zeitung (NZZ) analyzed these regulatory documents in detail. Its data team included all 163 regulatory documents with final status as of 31st of July 2017 in their analysis (see «Methods» part at the end of this article). Major elements of this regulatory framework are Basel I (the first Basel capital accord, 1988), Basel II (2005), and Basel III (2010).

The most obvious development is the sheer growth of text over the years. Figure 1 shows, for the past 40 years, how much new text the Committee has published per year.

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In the aftermath of the financial crisis, the Committee has published 2795 pages. This is more than half of the entire regulatory framework consisting of 5440 pages and 2 million words – the Basel framework has reached an epic dimension.

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The Basel documents are not only thousands of pages long, they are also a hard read. An average sentence in the Basel documents consists of 25.7 words, often embedded into complex grammatical structures. In comparison, an average sentence of the British National Corpus, which is a collection of texts covering a broad range of modern British English, only consists of 21 words.

Already the second sentence of the very first document published by the Basel Committee on Banking supervision spans over 72 words.

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