The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures

June 1, 2000

Preview Citation

Format: Chicago

Cem Karacadag, and Michael W Taylor. The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures, (USA: International Monetary Fund, 2000) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper considers the implementation challenges facing the Basel Committee’s new proposals on bank capital standards. When compared with the existing Capital Accord, the proposals represent a shift across two intersecting dimensions—regulatory versus economic capital, and rules-based versus process-oriented regulation. On minimum capital standards, the case for using external ratings may be stronger than has been recognized, given the divergences in the purpose and design of internal ratings. On supervisory review, ensuring comparability among supervisors and building supervisory capacity will present serious challenges. On enhancing market discipline, incentives for markets to exercise discipline will be required.

Subject: Banking, Capital adequacy requirements, Commercial banks, Credit ratings, Credit risk, Financial institutions, Financial regulation and supervision, Market risk, Money

Keywords: Allocation process, Allocation system, Assessment method, Bank capital, Capital adequacy, Capital adequacy requirements, Capital allocation process, Capital allocation processes, Capital charge, Capital regulation, Capital requirement, Capital standard, Commercial banks, Credit ratings, Credit risk, Global, Higher-than-minimum capital requirement, Market discipline, Market risk, Prudential supervision, Rating agencies, Rating agency, Regulatory capital, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/093
Stock No:

WPIEA0932000
ISBN:

9781451851649
ISSN:

1018-5941

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