Basel to Add ‘Clarity and Safety to Industry’ – Report

In a new report on the likely impact of Basel 2 on the banking sector, Moody’s said that new Capital Accord is likely to add more clarity and safety to the industry. ‘It matters little if the Accord will be finalised with several months of delay, what is clearer now is that there seems to be no way back – which brings more certainty to the entire process,’ said the ratings agency. It went on to explain that the main effect of Basel 2 should be a marked improvement to regulatory philosophy and in the framework for risk measurement, management, and controls. Moody’s noted that it does not expect the banking industry to necessarily achieve a higher level of regulatory capital solely as a consequence of Basel 2. In fact, the rating agency stated that the banking industry in the industrialised world (with the exception of Japan) is relatively well capitalised, especially when compared to the effort of so many banks to limit and even reduce the risk profile of their business and balance sheet. To some extent this is true even in Germany, although there are several cases of banks with low economic capitalisation, said Moody’s.


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