As banks scramble to rebuild balance sheets, the debate surrounding Basel II is akin to film buffs discussing the sequel to Die Hard – most agree it is an improvement, but does it actually matter? The first Basel accord was a stab at regulating bank capital. The riskier the assets, the more capital banks had to set aside. Twenty years on, Basel II aims to make a number of improvements, most importantly refining and broadening the measurement of risk.

Many now argue that Basel II is over-reliant on banks’ own modelling. There are also geographic discrepancies and it is being implemented in fits and bursts. But these quibbles miss a bigger problem: when calculating regulatory risk, what is the correct weighting to give each asset class? Basel II may be refined but it still largely relies on statistical analysis to calculate the probability of a loss. Triple-A sovereign debt requires no capital, while riskier credit card lending incurs a 75 per cent weighting.