Procyclicality

IIF says much work remains on Basel II

The Institute of International Finance (IIF), the Washington, DC trade association of financial institutions, contends that Basel II still has a long way to go before it can be finalised, in its response to the Basel Committee for Banking Supervision’s…

Accord preparations: the rest is yet to come

While the debates have raged for months about many aspects of the proposed Basel II Accord, on some points there has been relative silence, in particular with regard to the seeming overreliance on statistical techniques.

Sponsor's article > Is 8% for all seasons?

Considering the potential pro-cyclical impact of Basel II and the limited effectiveness of countervailing influences, David Rowe concludes that making the 8% ratio of capital-to-risk-adjusted-assets a discretionary policy variable should be part of the…

BIS publishes raft of papers

The Bank for International Settlements published online a number of papers that cover a variety of aspects of the Basel II proposals. The papers were presented at a workshop organized by the Basel Committee and the Banca D'Italia in late March.

Sponsor's article > No cure through the cycle

Some have argued that the antidote for pro-cyclicality in the Basel II capital requirements is the use of 'through-the-cycle' estimates of default and recovery rates. David Rowe argues that, whilethis might mitigate the pro-cyclical impact of the Accord,…

BIS paper slams rating agencies

A new paper just published by the Bank for International Settlements' Monetary and Economic Department, titled 'Are credit ratings procyclical?' takes a critical view of rating agencies' activities.

Sponsor's article > Don't count on buffers

One possible mitigator of the pro-cyclical impact of risk-sensitive capital requirements would be counter-cyclical changes in capital buffers. Empirical evidence on this issue is scarce and a new regulatory capital regime could well induce a behavioural…

Sponsor's article > Basel II and pro-cyclicality

The main argument for making regulatory capital requirements more risk-sensitive is to improve allocational efficiency. But this may lead to intensified business cycles if regulators fail to take measures to prevent such an impact.

Avoiding pro-cyclicality

David Cosandey and Urs Wolf argue that, for small to medium-sized enterprises, Basel II is pro-cyclical because of a double-counting of the risks. They present two main directions for possible capital rules that would circumvent the pro-cyclicality…

Fed's Gordy criticises Basel II procyclicality adjustment

NEW YORK - The procyclicality ‘smoothing’ adjustment technique likely to form part of the Basel II capital Accord is sub-optimal, according to Michael Gordy, a senior economist in the research and statistics division of the Board of Governors of the…

Key Basel II package expected tomorrow

BASEL – Global banking regulators plan to issue a package of documents on the Basel II bank accord tomorrow, including a key survey seeking information on how the complex, risk-based accord might affect banks around the world.

Pro-cyclicality in the new Basel Accord

Could Basel II worsen recessions? By backtesting the proposed capital rules to the last recession, D. Wilson Ervin and Tom Wilde argue that the increased risk sensitivity of loan portfolio regulatory capital in the new Accord could have unwelcome…

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