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Is 8% for all seasons?

Considering the potential pro-cyclical impact of Basel II and the limited effectiveness of countervailing influences, David Rowe concludes that making the 8% ratio of capital-to-risk-adjusted-assets a discretionary policy variable should be part of the new capital Accord

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In recent months, this column has considered how introducing greater risk sensitivity into the Basel capital Accord could accentuate the business cycle. Michael Gordy, senior economist at the US Federal Reserve Board, has argued that, in practice, required capital will be smoothed over the business cycle, since the consequences of not doing so are simply too severe. He sensibly

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