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The New Basel Capital Accord: Structure, Possible Changes and Micro- and Macroeconomic Effects. CEPS Reports in Finance and Banking No. 30, 1 September 2002

Resti, Andrea. (2002) The New Basel Capital Accord: Structure, Possible Changes and Micro- and Macroeconomic Effects. CEPS Reports in Finance and Banking No. 30, 1 September 2002. UNSPECIFIED.

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    Abstract

    During the last 12 years, the 1988 Basel Capital Accord dealing with minimum capital requirements for internationally active financial institutions has grown more pervasive, being integrated into national regulations in most advanced countries. Meanwhile, the limitations and drawbacks of the simple rules on which it is based have become increasingly apparent. In other words, the existence of a gap between supervisory requirements and risk-based measures of economic capital has led to forms of regulatory arbitrage (whereby loopholes in the regulation have been exploited to increase the real leverage of a bank without reducing its capital ratios). Paradoxically, the inability of the 1988 protocol to discriminate between investment grade and junk borrowers might also have made some financial institutions more risk-seeking, instead of helping them control their risks. To address such challenges, the Basel Committee on Banking Supervision has been engaged for several years in a revision process that will finally lead to a New Basel Capital Accord (NBCA). Remarkably, the new Accord is not being engineered inside a secluded laboratory by a handful of regulators and financial rocket-scientists, but its contents have been thoroughly discussed by national supervisors, banks and academics. Thus, the NBCA drafting has become a meeting point for many different perspectives: legal experts, accountants, bank managers, central bankers and finance scholars (to name only a few) have been working together, merging their professional backgrounds to make the NBCA more robust in its structure and parameters. This report tries to provide a complete, up-to-date, critical picture of the new Basel approach to bank capital, by summarising its structure and possible changes, and by focusing on some limitations and pitfalls that might deserve further investigation.

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    Item Type: Other
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Research Reports in Finance and Banking
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 20 Aug 2009
    Page Range: p. 46
    Last Modified: 06 Apr 2012 11:30
    URI: http://aei.pitt.edu/id/eprint/9564

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