Cutting the Gordian knot

Basel II remains wedded to incremental extensions to the market risk rules. It is time for a bolder approach in this area, argues David Rowe

Developing a uniform set of capital requirements applicable to the diverse range of banks around the world is no easy task. Once specifi c requirements complete the tortuous vetting process and are implemented, there is understandable reluctance to alter them at a later date.

During most of the period of debate around Basel II, the expectation was that it would leave the market risk rules untouched. But as the deliberations dragged on, there has been a significant migration of credit risk from