The Basel Committee on Banking Supervision released guidelines Tuesday that would expand what banks would need to consider in developing incremental risk charges under the Basel II capital rule.
The guidelines, which are open to comment through Oct. 15, are intended to capture the risk of assets losing value but not actually going into default. The guidelines have been in development since July 2005, but international regulators began revisions in March to address the market turmoil.
The Basel Committee "decided to expand the scope of the capital charge to capture not only price changes due to defaults, but also other sources of price risk, such as those reflecting credit migrations and significant moves of credit spreads and equity prices," according to the consultative document released by the international group of regulators.
"The decision was taken in light of the recent credit market turmoil, where a number of major banking organizations have experienced large losses, most of which were sustained in banks' trading books," the document said.
The 12 largest domestic banks will begin implementing initial provisions of Basel II this year. They are expected to develop plans for implementation of the accord by Oct. 1.
