Journal of
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Archive » October 2015 » Basel regulation explained with dice. Simplicity, complexity and common sense

Basel regulation explained with dice. Simplicity, complexity and common sense

Simone Casellina, Mario Quagliariello
October 2015 - n. 10
Jel codes: G21, G28

In recent years it has spread the idea that banking regulation has become too complex and that this complexity is basically useless as it can be replaced with simpler rules and common sense. In this article we try to explain the framework underlying the current legislation. With simple examples, we introduce the concepts of expected and unexpected loss and of conditional loss and we show the advantages of this approach compared to a seemingly more simple and intuitive one. The paper also shows how, equipped with these concepts, it is easy to get an overall view, albeit simplified, of most of banking regulation's instruments

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