Isda welcomes “positive” Basel II statement

The progress statement on the Basel II bank accord issued today by global regulators was mostly positive, said officials at the International Swaps and Derivatives Association (Isda), the trade body for the world’s financial risk management industry.

They particularly welcomed confirmation by the Basel Committee on Banking Supervision, the architect of Basel II bank capital adequacy accord, that banks using both the foundation and advanced internal ratings-based (IRB) credit risk approaches will need to take account of a loan’s remaining maturity when determining regulatory capital.

But it is still unclear whether banks can use economic maturity or contractual maturity, the officials said.

They also welcomed the decision to drop the idea of a floor below which operational risk capital charges for banks using advanced approaches cannot fall.

But they said it’s uncertain whether the new single capital charges floor for credit and operational risk suggested by the Basel regulators would be higher than the separate credit and op risk floors originally proposed.