Publication

This paper discusses the proposals for a revised Capital Adequacy Accord of the Basel Committee for Banking Supervision (BCBS). It outlines four areas that must be addressed before the new accord can be implemented with confidence. Section one presents the current state of the proposals. The second section focuses on the potential decline in the overall capital holdings and hence in the level of protection against systemic risk. The third section considers the strong pro-cyclical effect that the new proposals are likely to have. Section four looks at the various adverse consequences the accord may have for developing countries, and the fifth section outlines the potential impact on the structure of the banking industry.