Basel II op risk floor abandoned

Previously the Basel Committee on Banking Supervision had proposed that the op risk capital charge for banks using advanced approaches could not fall below 75% of the charges as calculated using the simpler, standardised approach.

Some bankers and banking industry analysts had criticised the floor on the grounds that it provided little incentive to banks to adopt the more advanced approaches – key aim of the Basel II bank capital adequacy accord.

The Basel Committee, the body that effectively regulates international banking, is the architect of the risk-based Basel II accord. The pact will determine how much capital major banks must set aside from late 2006 to guard against banking risks including, for the first time, operational risk.

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