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Whilst Basel II continues to make progress during the crisis, questions are being asked about parts of it, and it is clear that the Accord will evolve as a result of the forthcoming expected international government and regulator meetings.
Last week the China Banking Regulatory Commission (CBRC) announced progress with the first set of guidance notes for Basel II implementation. The CBRC’s Basel II Research and Implementation Taskforce has released five pieces of guidance for commercial banks for pre-release internal review:
- Classifying Credit Risk Exposure in Banking Book,
- The Supervisory Guidance on Internal Rating System for Credit Risks,
- Regulatory Capital Measurement for Special Lending,
- Regulatory Capital Measurement for Credit Risk Mitigation, and
- Regulatory Capital Measurement for Operational Risk.
The CBRC said that 2008 and 2009 would be the preparation period for Basel II implementation and they would start processing commercial bank’s implementation applications from the year 2010. Banks were now asked to start organising training for staff at all levels.
Last week, we commented on the likelihood of the 8% minimum capital requirements (MCR) level being increased. British, French and US politicians and regulators are now calling for a new Bretton-Woods, and the creation of a global regulators college which would oversee the top thirty global banks is being proposed in many quarters together with variable MCR.
Also last week, in a series of interviews since taking up office less than a month ago, Lord Turner of Ecchinswell, Chairman of the UK’s Financial Services Authority, discussed a series of possible initiatives including limitation on mark to market accounting, an overhaul of incentive schemes for bankers, as well as countering pro-cyclical risk with specific counter cyclical reserves such as variable MCR. Will all this take the nine years that it took Basel II to get off the drawing board? Turner promised to do it a bit faster this time.
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