The Basel Committee on Banking Supervision is leading the global banking industry down the wrong road. Far from adding to the stability of the world's financial system, Taylor argues persuasively that the Committee's new capital adequacy standard for banks – Basel 2 – will create major problems. Basel 2 will be expensive to implement, deepen business down-turns, engender system-wide herd behaviour, discourage improvements in best risk management practice (contrary to supervisor intentions), incorporate new risks inappropriately and institute extraordinary complexity. But above all, it may very well have the unintended consequence of undermining corporate governance in the banking sector by usurping bank managements’ prerogative to manage their own capital and risk. At 1,000 pages and counting, Basel 2 is in danger of becoming the FASB rulebook of international banking.