Regulators should keep internal models

Uwe Gaumert

A growing chorus of voices has been calling for a significant overhaul of the Basel capital framework over the past year. The current system, which allows banks to use their internal models to calculate regulatory capital requirements, is too complex, gives banks too much leeway to determine inputs, and generates outputs that cannot be compared from bank to bank, critics say. These concerns appeared to be backed up by two recent reports from the Basel Committee on Banking Supervision, which h