WASHINGTON International regulators on Monday floated a plan to revise one of the most highly criticized elements of a proposed new capital accord.
The Basel Committee on Banking Supervision, which is rewriting capital rules that govern large international banks, requested comment from the industry on six recommendations for determining how capital rules apply to banks expected loan losses.
A draft proposal released in January would, for the first time, let banks use internal systems to help set their regulatory capital levels. The proposal would define capital as funds held by banks as protection against expected and unexpected losses. Banks objected, arguing that they already hold reserves against their expected losses and should not be required to protect themselves against the same losses twice.
The paper issued Monday uses the same definition of capital, making it likely that whatever changes the committee decides to make to the treatment of expected losses when calculating capital will continue to face industry opposition.
Because they have not changed the definition of capital and havent really established a soundness standard, anything they try to do here on the margins is going to be flawed, said Pamela Martin, spokeswoman for RMA The Risk Management Association.
Text of the proposal is available on the Basel Committees Web site, www.bis.org.
