Basel regulators don’t foresee lengthy talks on Basel II

BASEL – Global banking regulators don’t foresee lengthy talks with banks when they issue their third and final consultation paper next year on the complex and much-delayed Basel II bank capital accord.

The Basel Committee on Banking Supervision, the architect of Basel II and the body that in effect regulates international banking, said industry responses to the paper, known as CP 3, will be asked for within a period that will ensure the accord comes into effect by year-end 2006.

The committee expects to issue CP 3 in the second quarter of next year, preparatory to issuing by the end of 2003 a final version of the risk-based accord aimed at making the world’s banking system safer.

The committee’s views were contained in an overview paper that accompanied the key third quantitative impact study, or QIS 3, that the Basel regulators began issuing to more than 200 banks in over 40 countries yesterday.

QIS 3 will seek information from the banks on how the new accord would affect them. The QIS 3 survey sets out the proposed minimum capital charges that will be required of banks under Basel II and gives banks a clear idea of how the regulators envisage the shape of the final accord. Responses have to be returned by December 20.

The Basel regulators want to apply the accord in the first instance to the large, international banks of the leading economies from late 2006. Basel II will determine how much of their assets the banks will have to aside as a cushion of capital to absorb unexpected losses from banking risks, including credit, market and operational risks.

The Basel Committee said the rationale for a short CP 3 comment period was that it had consulted with the banking industry and others throughout the process of revising the current Basel I capital adequacy accord and will continue to do so.

The paper did not say how long a comment period was envisaged. CP 2, the second Basel II consultation paper issued in January last year, allowed for a three-month comment period.

The current, and simpler, Basel I accord dates from 1988 and has been adopted by over 100 countries.

BaselAlert.com