Basel II could endanger stability if cuts in capital charges are too big, says UK central banker

Bank of England deputy governor David Clementi said this may happen if the world’s most important banks were given a large enough "capital carrot" to use the internal ratings approaches for calculating how much capital to set aside against banking hazards.

Banks will be able to use their own internal measurements of risks, including operational risks, in the calculation of capital charges under Basel II. This is the new capital adequacy accord proposed by the Basel Committee of banking

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