Revisions to international bank solvency standards: A UK supervisory perspective
| DOI | https://doi.org/10.1108/eb025084 |
| Pages | 305-311 |
| Published date | 01 April 2001 |
| Date | 01 April 2001 |
| Author | Terry Allen |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 9 Number 4
Papers
Revisions to international bank solvency
standards: A UK supervisory perspective
Terry Allen
Received: 17th
July,
2001
Financial Services Authority, 25 the North Collonade, Canary Wharf, London, E14 5HS, UK;
tel:
+
44
(0)20 7676 1000; fax: +44 (0)20 7676 1099; e-mail: terry.allen@fsa.gov.uk
Terry Allen is currently a manager in the
Risk and Research Department of the
Financial Services Authority. Until
recently, he worked in the Prudential Stan-
dards Division as part of the team respon-
sible for taking forward work on revisions
to the Basel Accord and related EU direc-
tives. In that role, he represented the FSA
in Basel, first on the Models Task Force
and then on the Capital Group.
ABSTRACT
The paper summarises the key elements con-
tained in recent proposals to revise the Basel
Accord on bank capital and
associated
European
Union requirements. A major consultative
paper was issued by the Basel Committee in
January this year and it is intended that the
new rules will be finalised next
year
following
a
further round of
consultation.
The paper out-
lines the
rationale
for the revisions, in particu-
lar the need to combine a more risk-sensitive
approach without encouraging a reduction in
capital
adequacy
within the banking system.
The revisions currently being made to the
Basel Accord on bank capital1 and the asso-
ciated programme to amend related EU
directives represents the most significant
change in international regulatory stan-
dards for banks in over a decade. As out-
lined in the Basel committee's first
consultative paper issued in June, 1999 and
reiterated subsequently, the purpose of
these changes is to achieve the following
supervisory objectives:
— the Accord should continue to promote
safety and soundness in the financial
system and, to this end, it should at
least maintain the current overall level
of capital in the system
— the Accord should continue to enhance
competitive equality
— the Accord should constitute a more
comprehensive approach to addressing
risks
— while the Accord should focus on inter-
nationally active banks, its principles
should be applicable to a range of
banks.
The challenge for banking supervisors is to
reconcile these objectives against a back-
ground of rapid product innovation in
credit markets and the application of more
advanced risk management techniques.
This has necessitated a move away from
the predominantly 'one-size-fits-all'
approach of the present Accord, recognis-
Journal of Financial Regulation
and Compliance, Vol. 9, No. 4,
2001,
pp. 305-311
© Henry Stewart Publications,
1358-1988
Page 305
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