
Single-bank capital accord impossible for all banks, says Basel chief
McDonough, who is also president of the New York Federal Reserve Bank, said Basel regulators want to give practical assistance to banking supervisors in developing regulatory regimes suitable for national circumstances and local banking systems.
But the purpose was not to develop one or even several specific “Basel-approved” approaches to regulation, he added.
The Basel Committee wants to introduce the Basel II accord for large, international banks from late 2006.
Basel II will determine how much of their assets major banks must set aside as a cushion of protective capital to absorb unexpected losses from banking risks, including credit, market and operational risk. The risk-sensitive accord encourages banks to measure the risks they face using internal computerised models and loss data. Banks using sophisticated risk management and measurement methods won’t be required to set aside as much protective capital as banks using cruder approaches.
Basel II will replace Basel I, the much simpler, one size-fits-all capital adequacy accord that dates from 1988 and which has been adopted in more than 100 countries.
McDonough noted that some countries have only recently adopted the 1988 accord and may still be working to ensure a basic level of capital adequacy.
He said that for some national supervisors, “retention of the current accord, supplemented by the second and third pillars, may be the best way forward”. Basel II has a three-pillar structure comprising capital charges under the first pillar, monitoring by supervisors under the second, and market discipline through greater disclosure of information under the third.
“Other countries may elect the [simpler] revised standardised approach of the new accord. Still others may seek a hybrid of these two possibilities,” McDonough said.
Attempts to force a uniform approach on non-complex domestic banks that typically do not compete across national borders “are unnecessary and possibly counter-productive,” he added.
“Instead, our energy would be better spent on sharing ideas and developing a common understanding of the challenges that supervisors face in dealing with non-complex domestic banking organisations.”
David Keefe
For similar articles please visit www.BaselAlert.com - an indispensable source of news, comment and analysis on the development of the Basel II accord and banking supervision. The site contains a searchable archive of news, articles and technical papers, and a free monthly e-mail summary. Click here for a free trial.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Technology
Risk applications and the cloud: driving better value and performance from key risk management architecture
Today's financial services organisations are increasingly looking to move their financial risk management applications to the cloud. But, according to a recent survey by Risk.net and SS&C Algorithmics, many risk professionals believe there is room for…
Machine learning models: the validation challenge
Machine learning models are seeing increasing demand across the capital markets spectrum. But how can firms improve their chances of gaining internal and regulatory approval for these type of models?
Banks strive for machine learning at quantum speed
Embryonic work on quantum neural networks raises hope of faster, more accurate models
Big banks seek solace in quantum-proof encryption
Barclays, JP Morgan and SocGen act to counter threat from next generation of computing
Facing the future: the growth of automation in Asia‑Pacific fixed income trading
How can automation improve fixed income trading strategies and best execution? In a recent Asia Risk webinar, in partnership with Tradeweb, a panel of market experts discussed the outlook for automation in the trading space
Moonshots and machines: can AI solve the problems of fincrime?
New technologies such as artificial intelligence (AI) and machine learning promise much in the battle against financial crime, but where are these solutions best deployed? A panel of anti-money laundering and analytics professionals convened for a Risk…
Next-generation technologies and the future of trading
At a Risk.net webinar in association with capital markets technology provider Numerix, panellists discuss the potential for increased adoption of the public cloud to boost investment performance, its impact on risk management and overcoming barriers to…