Basel Group Set to Toughen Rules on Risk-Based Capital
BASEL - The Basel Committee on Banking Supervision, a forum of international regulators that was instrumental in coordinating the crackdown last week on Bank of Credit and Commerce International, is preparing to focus on refining risk-based capital rules, E. Gerald Corrigan said.
Mr. Corrigan, president of the Federal Reserve Bank of New York, was installed this week as chairman of the Basel committee. He succeeded the late Huib Muller of the Netherlands central bank.
The Basel committee - representing regulators from the Group of 10 industrialized countries, Luxembourg, and Switzerland - was responsible for the 1988 guidelines that require all banks to maintain capital equal to 8% of risk-adjusted assets.
Market-Risk Factors a Priority
Mr. Corrigan told a press conference that the committee's priority will be to incorporate more market-risk factors in the capital guidelines.
"We want to build in explicit allowances for market risk as it pertains to foreign exchange trading, debt securities, and equity securities," the U.S. central banker said.
He added that any new recommendation in these areas would not be available for implementation until late 1992. The Basel committee also aims to extend the new provisions beyond banks to include companies that trade securities, Mr. Corrigan said.
Meanwhile, the Group of 10 central bank governors spent their meeting this week discussing improvements that might be made in banking supervision following allegations of massive fraud at the Bank of Credit and Commerce Group.
"We have asked ourselves what lessons we can draw in our handling of these problems either nationally - or internationally," said Jacques de Larosiere, chairman of the Group of 10 central bank governors committee, after the monthly meeting at the Bank for International Settlements.
Mr. De Larosiere, who is also governor of the Bank of France, said the Group of 10 committee had drawn no conclusions yet.