August 1, 2003
Representatives of the G-10 countries are expected to finalize the New Basel Capital Accord (Basel II) at the end of 2003 and recommend its implementation by end of 2006. This proposal makes important changes to the current capital framework that are central to the banking business - risk management and risk and capital allocation as the basis of capital sufficiency determination.
Although banks will still need to set aside a minimum of $8 in capital for every $100 of risk-weighted assets, the way these assets are weighted, by whom and how the process is supervised will bring about an important change in the operation and supervision of the banking sector. The implementation of the new acc
The international banking community is adopting a new set of rules for determining capital adequacy. Banks will have more flexibility in classifying their credit risks but will be unequally affected by the required capital allocation.