Consensus Achieved on Basel II Proposals

The Basel Committee on Banking Supervision announced it has finally achieved consensus on the proposals for a new international capital adequacy standard. The final text of the Basel II Accord will be published at the end of June. It will serve as the basis for national rule-making and approval processes and for banking organisations to complete their preparations for Basel II’s implementation. The Committee confirmed that the standardised and foundation approaches will be implemented from year-end 2006, but a further 12 months of impact analysis/parallel running will be needed for the advanced approach. It is expected that a further year will be required for the Accord to pass into national law. The consensus reached included agreement on specifying a treatment for revolving retail exposures and resolving the measurements required for ‘loss-given-default’ (LGD) parameters for banks that adopt one of the internal ratings-based (IRB) approaches to credit risk. ‘The publication of the text opens a new phase for Basel II,’ said Nick Le Pan, Vice Chairman of the Committee and the Canadian Superintendent of Financial Institutions. ‘Regulators and bankers gain an opportunity to enhance banking supervision and risk management, although non-member countries must proceed at their own pace based on their own priorities.’


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