Such capital arbitrage has greatly reduced the usefulness of regulatory capital ratios at the largest banks and provides little useful information to the public or the supervisor. For these institutions, the regulatory rules must be changed. This is the practical reality that bank supervisors face. Change and Complexity, Flexibility and Comparability This audience is well aware of the reality that I have just described.
But a second practical problem is that no one likes change, at least change imposed on them. Change can be expensive and, worse, requires new constructs that have the potential for unintended implications. For this reason, more than any other, the development of Basel II has taken a long time.