National regulators able to ‘opt out’ of Basel II maturity treatment

The Basel Committee on Banking Supervision, the architect of Basel II, has climbed down from its initial plans to force banks to include a full maturity adjustment on capital allocated against risk of defaulting loans, in its proposed mark-to-market advanced internal ratings based (IRB) rules.

The move – made in response to fierce German opposition to initial proposals – means national regulators can opt out of forcing banks to use a full maturity adjustment in marking-to-market loans to domestic firms. But this only counts for firms with consolidated sales and consolidated assets of less than €500 million.

Many studies have shown that banks should hold more capital against longer-term loans. “The data analysed by the committee clearly shows that you have these upward-sloping curves

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