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'Restructuring' partly dumped as Basel shifts stance on risk mitigation

The Basel Committee on Banking Supervision, the architect of new banking regulation, Basel II, which is due for implementation by the end of 2006, has made a number of concessions in its proposed treatment of risk mitigation techniques in the release of its third consultative paper, CP3, today.

The Committee has partially dumped its requirements for the inclusion of ‘restructuring’ as a credit reference event when recognising credit derivatives for risk lay-off related to a bank’s lending book. But under these circumstances, the bank must have complete control over the decision of whether or not there will be a restructuring of the underlying obligations.

“During the CP3 consultative

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