Compliance and International Soft Law: Why Do Countries Implement the Basle Accord?

Abstract

This article presents empirical research into why countries comply with international soft law. I examine economic and institutional determinants of implementation of the 1988 Basle Accord on capital adequacy from a dataset of 107 countries. Market forces partially explain national decisions to implement the Basle Accord, lending support to the interpretation of international law as a reputational mechanism. One of the most striking and robust findings is the consistent positive effect of democratic systems on implementation, lending credence to democratic legalist theories of international law. Some evidence suggests that divided government and corruption are both negatively associated with soft law compliance. The findings also refute the explanation that countries 'learned' from prior banking crises, and support the contrary proposition that countries that experienced banking crises are in fact less likely to comply with international harmonization of banking regulation. Copyright Oxford University Press 2002, Oxford University Press.