There are two schools of thought on Basel II, the regulations that specify the level of capital that banks in dozens of countries must abide by.

Supporters say the rules' risk-based approach to capital requirements stopped many banks from suffering an even worse fate in the financial crisis. They argue that the alternative, US, norm of restricting the leverage – or relative indebtedness – of a bank's balance sheet proved useless because banks simply shifted risky investments off the balance sheet.

Basel II's critics, however, insist the rules exacerbated the crisis because they allowed those that were prepared to follow the letter, but not the spirit, of the rules to increase the leverage of their balance sheets enormously, investing in assets that were nominally safe, yet in reality were anything but.

One of the principles of Basel II – that a bank's capital should be based on the riskiness of its assets – was undermined when measures of riskiness, such as many credit ratings, were then discredited during the crisis. As triple-A rated investments turned sour, a disastrous unravelling of bank balance sheets ensued.

The question, then, is should Basel II now be ditched, to be replaced, perhaps, by Basel III? Jaime Caruana, general manager of the Bank for International Settlements, is convinced it should not.

“I don't think we are thinking of changing the rules on this scale,” says Mr Caruana. “We have seen that models are more imperfect than we thought. [What we are embarking on is] just an improvement of Basel II.”

“Basel II is evolving”, and was not a contributory factor to the crisis, he says. “I don't think so at all. You could see [the crisis] in countries where there was a leverage ratio and no Basel II [such as the US]. Other countries – Canada, Australia – were relatively unaffected. You don't see a correlation with the adoption of Basel II and the difficulties. What we have to realise is Basel II was not enough. It's not just regulation, it's implementation that matters. This is a crisis that can't be oversimplified in my view.”

Mr Caruana, previously a head of the Basel committee and Spain's central bank governor, says it has yet to be decided to what degree systemically important institutions should be subject to regulation and capital requirements.

“This is one of the most difficult elements to think about,” he says. “Systemically important institutions are not the same as too big to fail. That should be solved through resolution frameworks. And, of course, more capital will help.

“When we are talking about systemically important institutions, we are not saying there are ones that will not be able to fail. First, we want to get rid of the problem of too big to fail. Then it is recognised that bigger institutions will need closer oversight. Whether that means additional capital, that is what the Basel committee needs to decide.”

Leverage restrictions should be a back-up regulatory tool, Mr Caruana says. “Leverage will be a complementary measure. It is not very sophisticated but it helps at a supplementary level to make certain that the capital is at an appropriate level.”

Insufficient liquidity, widely recognised as a fatal flaw of the banking system when the crisis came, must also be addressed, the BIS chief says.

“The Basel committee is going to investigate some liquidity ratios that go beyond the guidance they gave on liquidity management. So yes, I don't know the shape or formula, but there will be a global standard for funding liquidity – there will be a stress liquidity, a long-term structural liquidity ratio.”

Asked whether banks could find their lending capacity limited to their volume of deposits, he says there could be “some kind of ratio that links some of these magnitudes”.