Basel II Banking Rules Had Perverse Effects

International banking rules such as Basel II have had the perverse effect of imposing the greatest capital restrictions on the smaller and less diversified banks that posed the least risk to the system, while the large “super-spreader” institutions were given more leeway. Borrowing an analogy from sexually transmitted disease, Mr Haldane says: “Basel vaccinated the naturally immune at the expense of the contagious; the celibate were inoculated, the promiscuous intoxicated.”

From "Organic mechanics" by Clive Cookson, Gillian Tett and Chris Cook published November 26, 2009 on FT.com.