The Bank of International Settlements (BIS) committee that produced the Basel II capital adequacy rules says it will adapt its rules to prevent another credit crisis.
The Basel Committee said it would raise capital requirements for the structured credit products, such as collateralised debt obligations of asset-backed securities, at the root of the credit crisis. Liquidity facilities extended to off-balance-sheet vehicles would also be treated more harshly under the new rules, due to be published later this year.
The new rules will also be less dependent on value-at-risk, which the committee says has failed to capture "extraordinary events". Instead, complex products will carry an event risk surcharge, to be introduced over the next two years.
Banks' risk management, especially liquidity risk management, was shown to be inadequate by the crisis, the committee added. It plans to issue guidance and best-practice standards over the next four months to help them improve, and encouraged better disclosure of exposures, especially structured product portfolios.
See also: Isda AGM: Calello urges industry to improve
Isda AGM: Regulatory scrutiny of derivatives likely, says Moulds
MBS capital charges coming soon in Basel II shake-up
Banks vow to improve transparency
Topics: Basel II
More on Regulation
SSM chair also wants to end rule opt-outs that make banks "look stronger than they really are"
Dodd-Frank and Mifid II won't stop market disorder but will penalise hedgers
Floors framework should not overstate risk, says Sweden's bank supervision chief
RBS risk veteran says banking activities pose greater threat
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.