QIS4 results show additional capital is needed, says S&P

The early results of the Fourth Quantitative Impact Study (QIS4), which show a significant reduction in Basel II regulatory capital in Germany and the US, point to the need for additional capital charges under Pillar II of the new banking framework, according to Standard & Poor's rating agency.

In a report, Latest Test Run of Basel II Raises Troubling Issues for Regulators, the S&P financial institutions group says the potential outcome of Basel II is that bank regulators would need to make material capital charges for non-credit risks, notably interest rate risk, concentration risk, strategic risk, liquidity risk and the effect of the business cycle.

The second pillar of the framework (supervisory review process) notes that these risks are not covered in the Pillar I

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