The Basel Committee on Banking Supervision of the Bank for International Settlements in Basel, Switzerland, is a group of international banking regulators that, among other responsibilities, proposes international capital standards. After the financial crisis beginning in 2008 demonstrated that the previously adopted market risk standards did not provide for sufficient capital to absorb the large trading losses that had occurred, the committee adopted partial revisions in 2009 and declared that it would undertake a thorough review of the standards.
In May 2012, the committee issued its first consultative document on this issue and based on comments it received, on Oct. 31, 2013, issued a second consultative document (Consultative Document), this time with specific proposed revisions to the Basel Capital Accord’s market risk provisions.1 The deadline for comments is Jan. 31, 2014, and international banks may want to review the proposals closely to determine what effect they would have on their trading operations. The committee plans to carry out a Quantitative Impact Study (QIS) in order to test these proposals on real bank trading portfolios. This month’s column will provide a general overview of the issues discussed in the Consultative Document.
