The Basle Committee on Banking Supervision - composed of reps from the 12 most important central banks - was started in 1974, after the failure of Bank Herstatt and Franklin Bank, and dedicated to multinational safety and soundness.  And ever since, it has been a crisis-driven regulatory effort (but maybe Sarbanes-Oxley and the 33 and 34 acts tell us that this is the case for all financial regulators).  Banco d'Ambrosiano, BCCI, and Baring have all prompted movement out of Basle.

So what will be the result of the SocGen fallout?  It's the schmanciest institution yet put in this sort of crisis, so I predict a bit more than hand-wringing and a working group.  You might expect a weird combination of greater efforts from Basle on, perhaps, inter-central-bank notification in crises, and a re-evaluation of some aspects of the most recent capital accord.  Currently, Basle relies on the internal risk models of banks.  SocGen's appeared to fail, or at least were circumvented.  Perhaps risk models plus, or an (no doubt headache-inducing) alternative minimum?  It's also possible that the Fed will make its already slow transition to the latest capital accord regime even slower.

I claim no expertise on the next set of substantive proposals, though.  Felix Salmon thinks Basle does too much.  Roger Ehrenberg just wants plain old harmonization (don't we all, buddy).

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