If you’re a sentient being then by now you are most likely near serious contemplation of self-destruction at the mere mention of the words Basel lll. Therefore, I will keep this mercifully short.

First, if you somehow missed the news, the Cliff Notes version is that new international capital standards for banks have been agreed upon and the conventional wisdom is they will forever more have the banks on a short leash. Sort of the financial equivalent of “Peace in our time. Felix Salmon has the best layman’s explanation of how it all comes together, so I would refer you there for all you really need to know.

Permit me to voice a bit of skepticism.

First, note the long phase in period for these regulations. There appears to be ample time for the banks to bend things to their betterment.

Second, these regulations so far as the US is concerned as well as most other countries don’t have the force of law. Regulators ultimately determine what the proper level of capitalization is for the banks under their jurisdiction, so the universal application of these rules is far from certain.

Third, apropos the second point, if regulators in one or more significant country choose to modify or even ignore the rules then the entire regime could unravel like a bad sweater. Don’t think for a minute that if the German’s choose to give their banks a break that JP Morgan won’t be on the Fed’s doorstep, not to mention those of their favorite Congress people, pointing out the advantages that Deutsche Bank enjoys.

Fourth, there’s every reason to believe that enterprising financial entrepreneurs won’t stand still for this and we’ll see banking activities migrate to shadow banking institutions or to countries not adhering to the accords.

While it might appear otherwise, I’m personally pleased to see tougher capital standards at least proposed. I hope that they do gain wide acceptance and think that they could marginally reduce the impact of the next financial crisis.

Ultimately, however, the best defense against a replay of our recent experience is certainty among financial players that they will be allowed to fail the next time around with all the pain that entails. Absent that discipline, the community will eventually create new products and assume new risks on the assumption they can put the losses to the taxpayers after amassing the gains. I see little indication they believe that reality is operative.