The shifting sands of Basel II

Four months after the Basel Committee on Banking Supervision closed the consultation period on its January 2001 draft for a new international capital Accord, it has already made major amendments to its proposal.

It has, for example, cut the capital charge for operational risk to 12%, from 20%. It has also moved the capital charge for credit risk mitigation techniques, the ‘w’ factor, from pillar one of the new Accord, the minimum regulatory capital rules, to pillar two, the supervisory process. And it has delayed implementation of the new Accord, dubbed Basel II, by one year to January 2005, while lightening the information disclosure burden on institutions.

The banking industry broadly welcomes

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