Resources for Basel II Capital Accord (Basel II)

Basel Committee takes steps to strengthen banking system

investmentexecutive.com

The Basel Committee on Banking Supervision today announced a series of steps intended to help make the banking system more resilient to financial shocks. These reforms include enhancing various aspects of the new capital adequacy framework for large, global banks, known as Basel II, including the capital treatment of complex structured credit products, liquidity facilities to support asset-backed commercial paper conduits, and credit exposures held in the trading book.

In particular, the committee will revise the framework to establish higher capital requirements for certain complex structured credit products, such as so-called “resecuritisations” or CDOs of ABS, which have produced the majority of losses during the recent market turbulence. It will strengthen the capital treatment of liquidity facilities extended to support off-balance sheet vehicles such as ABCP conduits. More detailed proposals will be published later this year.

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