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Getting International Banking Rules Right
International bank regulators are currently drafting a new version of the historic 1988 Basel Capital Accord, which set minimum capital requirements for banks around the world. Far from being an esoteric banking issue, the new rules will have far-reaching implications for banks and borrowers alike. As currently written, however, proposals for the new accord threaten to put an undue and unintended capital burden on banks and won't encourage them to pursue more sophisticated credit-risk-management practices.
The take-away: Although the new proposals represent a step in the right direction, important modifications are still needed. This article suggests four key ones.
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