Notes on the New Bank Capital Adequacy Framework (Alcune Osservazioni Sul Processo di Revisione Dei Requisiti Minimi di Patrimonializzazione Delle Aziende di Credito)

Rivista Italiana di Ragioneria e di Economia Aziendale (Rirea), No.1-2, pp. 40-55, 2005

Posted: 13 Jan 2012 Last revised: 6 Jun 2012

See all articles by Enzo Scannella

Enzo Scannella

University of Palermo - d/SEAS

Date Written: January 1, 2005

Abstract

The gradual changes of the international and national financial system has increased risks that banks have to face and has required stronger and more accurate instruments to monitor, to measure and to manage credit risks. The Basel Committee on Banking Supervision has developed a new framework for capital regulation based on three pillars. The New Capital Accord increases substantially the risk-sensitivity of the minimum capital requirements. The most important difference between the proposals and the current Accord is the fact that Basel II comprises multiple options from which banks and supervisors will select various approaches in calculating the minimum capital requirement. This paper aims to point out that an improved Basel Accord is intended to foster a strong emphasis on risk management and to encourage ongoing improvements in banks’ risk assessment capabilities. The risk assessment is a key mechanism for ensuring the stability of individual banks as well as the system as a whole. But judgements of risk and capital adequacy must be based on more than an assessment of whether a bank complies with the first pillar regulatory minimum. The inclusion of second pillar will therefore provide benefits through its emphasis on the need for strong risk assessment capabilities by banks and by supervisors alike.

Keywords: bank regulation, capital adequacy, Basel Accord, banking supervision, capital regulation, rating

JEL Classification: G01, G20, G21, G28, K20, M1, M2, M10, M15

Suggested Citation

Scannella, Enzo, Notes on the New Bank Capital Adequacy Framework (Alcune Osservazioni Sul Processo di Revisione Dei Requisiti Minimi di Patrimonializzazione Delle Aziende di Credito) (January 1, 2005). Rivista Italiana di Ragioneria e di Economia Aziendale (Rirea), No.1-2, pp. 40-55, 2005. Available at SSRN: https://ssrn.com/abstract=1983972

Enzo Scannella (Contact Author)

University of Palermo - d/SEAS ( email )

Viale delle Scienze, edificio 13
Palermo, 90124
Italy
+3909123895305 (Phone)
+39091489346 (Fax)

HOME PAGE: http://www.enzoscannella.com

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