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Tuesday, July 9, 2013

Basel Committee Offers Ideas on Simplicity, Comparability

The Basel Committee on Banking Supervision released a white paper outlining ideas to improve the simplicity of the international capital framework and make it easier to compare capital levels across countries. While defending Basel III’s “risk-sensitive regulatory framework,” the committee admitted that “the resulting complexity also entails a number of potentially severe consequences.”

The committee offered a number of approaches that it said might improve simplicity and comparability: increasing disclosure requirements, adding metrics on which banks are assessed, standardizing the leverage ratio, applying additional floors to banks’ capital requirements, reconsidering the connection between internal risk management and regulators’ models and limiting national discretion to tailor Basel standards.

Read the paper.

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