The world's largest banks have been given a one-year reprieve on the deadline for introducing sophisticated risk measurement systems under the latest set of proposals from bank regulators for a new international capital standard.
The group of central bankers and banking regulators who make up the Basel Committee on Bank Supervision say they will publish the text of the new framework, widely known as Basel II, at the end of June 2004.
At a meeting in Switzerland yesterday, the Committee finally resolved differences over capital requirements for credit card lending and asset-backed securities. It further confirmed that the less rigorous approaches to measuring risk capital which will apply to small and medium-sized banking groups will be implemented from year-end 2006. However, for the more advanced approaches to managing operational and credit risk, which generally will apply to the world's largest banks, the deadline for implementation has been extended to year-end 2007.
"The Committee feels that one further year of impact analysis/parallel running will be needed for the most advanced approaches," says the Committee in a statement. "This will also provide additional time for supervisors and the industry to develop a consistent approach for implementation."
Basel II represents a major revision of the international standard on bank capital adequacy that was introduced in 1988. The extension to the deadline will be welcomed by the world's largest banks and their regulators who have complained about the complexity of the new rules.