Research Discussion Papers, Bank of Finland
No 2/2001:
The New Basel Accord: some potential implications of the new standards for credit risk
Esa Jokivuolle ()
and Karlo Kauko ()
Abstract: This paper discusses some potential implications – both
intended and unintended – of The New Basel Accord, which is to be finalized
by the end of 2001. Our focus is on the reforms of the rules for
determining minimum capital requirements for credit risk. The discussion is
divided into effects at the level of an individual bank, effects on the
structure of the financial markets, and macroeconomic implications. We
present a survey of potential effects rather than a profound analysis of
any of them. Therefore conclusions are inevitably preliminary, and in many
cases they are likely to be controversial. Although the new capital accord
as a whole is a major improvement on many properties of the current
framework, our aim is to find potential problems that might need to be
considered in the implementation and application of the new rules. Overall,
the new accord will be largely an experiment, of which many of the
consequences remain to be seen.
Keywords: capital adequacy requirements; credit crisk; banking stability; (follow links to similar papers)
JEL-Codes: G21; G32; (follow links to similar papers)
23 pages, March 3, 2001
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