Basel II seen as meeting key challenge

The proposed Basel II rules on how much capital large international banks will have to set aside from 2005 to guard against banking risks will help meet the challenge of strengthening lines of defence in the prudential area, he told the BIS annual meeting.

He said the second challenge is to assess critically the relationship between monetary policy and financial stability with a view to consolidating gains made on the inflation front without unwittingly incurring costs.

The BIS, known as the c