The New Basel Accord: Some Potential Implications of the New Standards for Credit Risk

23 Pages Posted: 14 Aug 2017 Last revised: 20 Jun 2018

Date Written: March 2, 2001

Abstract

This paper discusses some potential implications - both intended and unintended - of The New Basel Accord, which is to be finalized by the end of 2001.Our focus is on the reforms of the rules for determining minimum capital requirements for credit risk.The discussion is divided into effects at the level of an individual bank, effects on the structure of the financial markets, and macroeconomic implications.We present a survey of potential effects rather than a profound analysis of any of them.Therefore conclusions are inevitably preliminary, and in many cases they are likely to be controversial.Although the new capital accord as a whole is a major improvement on many properties of the current framework, our aim is to find potential problems that might need to be considered in the implementation and application of the new rules.Overall, the new accord will be largely an experiment, of which many of the consequences remain to be seen.Key words: The New Basel Accord, capital adequacy requirements, credit crisk, banking stability

Suggested Citation

Kauko, Karlo, The New Basel Accord: Some Potential Implications of the New Standards for Credit Risk (March 2, 2001). Bank of Finland Research Discussion Paper No. 2/2001, Available at SSRN: https://ssrn.com/abstract=3018082

Karlo Kauko

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

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