Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Stage 8. The Capital Adequacy Regulation, Basel II

—Juvenal, in Satires

In Stage 6, we introduced the international BIS capital regulations. These were progressively applied around the world. However, there was a major weakness with the original BIS ratio: all loans – whatever their maturity or degree of risk – received an identical risk weighting of 100%. So, to relate better bank capital to risks and, as the members of the Basel Committee ...