US legislators question Basel II effectiveness

In a letter released to federal banking regulators today, 11 House Financial Services Committee members warned that Pillar 1 treatment of operational risk may force many banks to change their business models to remain competitive, if the Basel II framework was implemented in its current form.

“Basel II attempts to reduce regulatory arbitrage opportunities under the current framework. Regulators rightly seek to prevent firms from shifting assets within the balance sheet through instruments no

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