Resources for Basel II Capital Accord (Basel II)

"Computing Capital For Incremental Risk In The Trading Book" And "Revisions To The Basel II Market Risk Framework"

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The Basel Committee on Banking Supervision today issued for public comment Guidelines for Computing Capital for Incremental Risk in the Trading Book as well as Proposed Revisions to the Basel II market risk framework.

"Major banking organisations have experienced significant losses over the last year, most of which were sustained in banks' trading books" stated Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank. "Against this backdrop, the Basel Committee's incremental risk proposal will better align regulatory capital requirements with the risk exposure of banks' trading book positions." The guidelines support one of the key recommendations for strengthening prudential oversight set out in the Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, which was presented to G7 Finance Ministers and Central Bank Governors in April 2008.

These proposals were developed jointly by the Basel Committee and the International Organization of Securities Commissions (IOSCO). Mr Christopher Cox, chairman of IOSCO's Technical Committee and Chairman of the US Securities and Exchange Commission, noted that the proposed requirements will also apply to investment firms. He added: "The market turmoil has had a severe impact on many commercial and investment banks. The incremental risk guidelines and related changes to the Basel II Framework will contribute to a safer and sounder financial system."

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