The Futility of Excess, or The Displaced World of Rules and Regulations

Abstract

Basel II is the name of an international framework of banking regulation. The framework is taken as an opportunity to reflect on the possibilities of regulating excess in hyperreal markets from two perspectives. Basel II represents both, the attempt to tame the excesses of markets by excessive controlling, and an attempt to shift the regulation to an understanding of risk management beyond pure quantification. On this background the insights of a leading supervisor are confronted with a poststructuralist interpretation of rules and rule following to support a view of setting rules and regulations which cannot fix the intended result beforehand. A rule's meaning is (re‐)constructed when it is applied.

Key words:

• Basel II
• Hyperreality
• Différance
• Excess
• Rules
• Regulation

Acknowledgements

I would like to thank Lutz Achenbach who discussed the topic with me from his perspective of a risk manager and the anonymous reviewers whose reviews, regarding their volume, somehow reflected the topic of this special issue more than is usually done in reviews. They made clear that Basel II is a topic not easily digested. I very much appreciated their comments.

Notes

1. A derivative, e.g., a future or an option, is a financial instrument whose value depends on the price of another asset, the ‘underlying’.

2. The naming of the regulation's chapters as pillars and an image on Bundesbank's homepage (see ⟨http://www.bundesbank.de/bankenaufsicht/bankenaufsicht_basel.php⟩) resembling a temple inspired me for this drawing.

3. Given the reference made to Strange's (1986) term ‘Casino Capitalism’, the naming of a simulation model after a city famous for its casinos by professionals hints at least to a solid sense of irony, if not a clear consciousness of what they are actually doing: playing games on a global level. The origin of risk management and the calculation of probabilities in gambling is well researched (Hacking, 1975).

4. All direct quotes from German originals have been translated by the author.

5. In Germany the requirement of soundness is part of the German Banking Act (KWG—Kreditwesengesetz) and for trading of WpHG (Wertpapierhandelsgesetz) and are detailed in the minimum requirements.