Reforming Bank Capital Requirements: Implications of Basel II for Latin American Countries
The controversial proposal to overhaul the international accord regarding the regulation of bank capital was completed in 2004, and the thirteen Basel Committee member countries are set to implement the new accord, known as Basel II, by 2007. We develop a Basel II decision tree to guide policymakers facing the issue of whether to adopt the new accord. We also estimate credit risk in banks across three Latin American countries using a homogeneous methodology. Our findings suggest that Latin America falls between the two main Basel II alternatives. Non-G10 countries may thus wish to recalibrate Basel II's internal ratings-based (IRB) approach. Alternatively, we propose an intermediate centralized ratings-based (CRB) approach. We argue that the CRB approach may be made compatible with Basel II by developing an integrated policy for provisions and capital. We perceive a danger that Basel II may be adopted too quickly or inappropriately and may then represent the end of a standard rather than the establishment of a new one. We suggest that a Basel II-compatible CRB approach with homogeneous definitions would enhance true comparability.
Volume (Year): (2005)
Issue (Month): (January)
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:col:000425:008663. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Bernal)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.