The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures

Author/Editor:

Cem Karacadag ; Michael W Taylor

Publication Date:

June 1, 2000

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper considers the implementation challenges facing the Basel Committee’s new proposals on bank capital standards. When compared with the existing Capital Accord, the proposals represent a shift across two intersecting dimensions—regulatory versus economic capital, and rules-based versus process-oriented regulation. On minimum capital standards, the case for using external ratings may be stronger than has been recognized, given the divergences in the purpose and design of internal ratings. On supervisory review, ensuring comparability among supervisors and building supervisory capacity will present serious challenges. On enhancing market discipline, incentives for markets to exercise discipline will be required.

Series:

Working Paper No. 2000/093

Subject:

Banking Capital adequacy requirements Commercial banks Credit ratings Credit risk Financial institutions Financial regulation and supervision Market risk Money

English

Publication Date:

June 1, 2000

ISBN/ISSN:

9781451851649/1018-5941

Stock No:

WPIEA0932000

Pages:

40

Please address any questions about this title to publications@imf.org