What’s in a name? The final proposals for bank-capital rules were dubbed Basel 3.1, as if to suggest a minor tidying-up exercise – just a few grace notes added to a melody composed long ago. But banks, concerned that the implications would be more severe, spoke of Basel 4, implying not grace notes, but a reworking of the entire composition, now in a major key.

That name didn’t stick. Regulators insisted that it was not a new tune, and that anyone who could sing Basel 3 would have no trouble picking up Basel 3.1. But then, some anonymous practitioner in the American political dark arts came up with the term Basel Endgame, which seems to suggest that someone is about to die. On the eastern side of the Atlantic, the term recalls Samuel Beckett’s play "Endgame" about existential angst and the futility and meaninglessness of human life. Non-bankers might find that to be a good description of the debate over the proper size of big banks’ reserves, which has now been ongoing for many years.

Some countries, like Singapore and Australia, have stopped arguing and just gotten on with it. In the European Union and the United Kingdom, the details are almost finalized. But in the United States, the endgame is nowhere near the end – which may even be further away than ever, following US Federal Reserve Chair Jerome Powell’s recent intervention.

Allow me to recount the short version of this tangled tale. It started last summer, when Fed Vice Chair for Supervision Michael Barr put forward some moderately tough proposals calling for sizable increases in capital. US banks mounted a robust counteroffensive, and now Powell has said that there must be “broad material changes” to proposals that were supported by a majority of Federal Reserve Board members just last year.

The merits of the underlying argument have almost been submerged by the politics. Are some banks right to argue that the Fed’s proposals will put them at a competitive disadvantage internationally? Comparing proposals across countries is very difficult. Barr’s plans, no doubt influenced by the spate of embarrassing US bank failures last year, did envisage a bigger increase in capital than was planned in the EU, but starting from a lower base. The UK, as ever, is somewhere in between.

Do all these different proposals comply with the original Basel agreement? The Basel Committee will answer that question itself in due time, but it currently looks as though the UK will comply more or less, while the EU will not. Under Barr’s proposals, the US regime would probably have been compliant, and on the tougher side. Now, no one really knows where it will land.

What we do know is that the constitutional arrangements that govern the setting of capital standards for banks are remarkably divergent in the three main Western jurisdictions. In the EU, the European Commission, a political body, holds the pen, because the stability of the single market requires that there not be significant divergences from place to place. If there were, all banks would be headquartered in the country with the weakest regime and would conduct all their European business there.

Thus, the EU Basel agreements are implemented through directives or regulations that carry the force of law throughout the bloc. Given the circumstances, it is not surprising that the outcome is a deal that may slightly undercut the original Basel agreement. Politicians, as usual, responded to special pleading. The so-called Danish compromise, for example, includes a concession for banks that own insurance companies. It is an open secret that if the European Central Bank was fully in charge, the EU would be compliant with Basel, as the UK plans to be.

Since Brexit, the UK regulator has been alone in the driver’s seat. The government delegated the power to set capital rules to the Bank of England, and though it sometimes sounds as though ministers regret having done that, I doubt the regime will change at this point.

At first glance, the US regime might resemble the UK’s, since the Fed is in the driver’s seat. But the Fed’s board, unlike the BOE’s board, is politically balanced, with a majority reflecting the party in power. That is why Barr was able to propose his robust package of rules in the first place. But now, argues Peter Conti-Brown of the Brookings Institution, Powell is trying to protect the Fed, rather than the financial system, in the face of strong public criticism. He “appears to prize Fed independence for monetary policy so dearly that he wants to avoid political fights about regulatory policy.”

That argument recalls the longstanding view of Germany’s Bundesbank that an independent central bank should not get into the dirty business of banking supervision. Gordon Brown, as Chancellor of the Exchequer, was acting on the same concern when he moved banking supervision to the Financial Services Authority (which I chaired) in 1997. But then George Osborne chose to reverse the move in 2013.

There are strongly held views on both sides of the debate about whether central banks should be responsible for banking supervision. But the way the Basel Endgame is playing out indicates that it will be very difficult to deliver common global standards across different constitutional arrangements.

In Beckett’s "Endgame," the character Clov is pathetically desperate to create order out of chaos. “I love order. It’s my dream,” he says. “I’m doing my best to create a little order.” That could be the Basel Committee’s motto as it tries to sell its wares. But like Clov, it may be facing insuperable odds.

Howard Davies

Howard Davies, a former deputy governor of the Bank of England, is chair of NatWest Group. -- Ed.

(Project Syndicate)