| Author: | Benink, H. Wihlborg, C. |
| Title: | The New Basel Capital Accord: Making it Effective with Stronger Market Discipline |
| Journal: | European Financial Management
2002 : MAR, VOL. 8:1, p. 103-115 |
| Index terms: | CAPITAL EFFECTIVENESS MARKETS DISCIPLINE |
| Language: | eng |
| Abstract: | In January 2001 the Basel Committee on Banking Supervision proposed a new capital adequacy framework to respond to deficiencies ò the 1988 Capital Accord on credit risk. The main elements or 'pillars' of the proposal are capital requirements based on the internal risk-ratings of individual banks, expanded and active supervision, and information disclosure requirements to enhance market discipline. The authors discuss the incentive effects of the proposed regulation. In particular, the authors argue that it provides incentives for banks to develop new ways to evade the intended consequences of the proposed regulation. Supervision alone cannot prevent banks from 'gaming and manipulation' of risk-weights based on internal ratings. |
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