(Asia) – The Basel Committee on Banking Supervision will finalise its new global banking rules by the fourth quarter of 2003, after a tortuous 4 years of work.The Committee plans to have the new capital management rules implemented as the standard by the end of 2006 in over 100 countries, having ensured that lending to small companies in all countries is not unfairly impacted.
Recent modifications now allow big banks to use their own internal credit ratings for borrowers to help determine the capital required to cover potential lending losses. The new agreement now stipulates that capital levels can only fall by up to 10 percent from current levels in the first year after implementation and by another 10 percent in the second year.
“Basel I” also now takes into account “operational risk” aimed at encouraging banks to invest in risk management systems to guard against fraud and computer failure.