Basel II is yet another attempt by the global financial community to remedy the woes associated with unhindered financial liberalization. However, this paper argues that its proposed implementation will lead to an increase in the cost of financing development for a variety of reasons. Further, it will generate new forms of regulatory biases and increased pro-cyclicality in bank lending, with associated implications for systemic stability. This will exacerbate the already existing conflicts between the objectives of financial stability and economic development facing developing countries under the present paradigm.
 
August 23, 2006.