Simplicity, risk sensitivity and comparability: The regulatory balancing act
Wayne Byres, secretary general of BCBS, feels that banks today cannot operate anywhere near as effectively without models for pricing and risk management. February 27, 2013 | Wayne ByresI would like to acknowledge that the Asian region leads the world in its implementation of Basel III. The region has benefited from the development of strong banking systems supported by strong regulatory regimes. Furthermore, many of you have recognised Basel III as a minimum, and have adopted local practices that impose additional requirements to deal with local risks. The result is healthy banking systems that are well equipped to support economic growth, not least by stepping into the gap created by the constraints faced by many banks in other parts of the world. Finding the right balance I am sure that many of you know the story of Goldilocks and the three bears. In it, Goldilocks explored the bears’ house, testing the porridge, the chairs and the beds until she found things that she thought were “just right”. When I took up my role in Basel, a friend suggested I had a “Goldilocks” job. By this he meant that my task was to take a range of competing objectives, and find some middle ground that was “just right”. In an international policymaking context, that implies policies that are: • comprehensive, yet simple; • strong, but not burdensome; • risk-based, yet easy to understand and compare; • flexible and adaptable, yet consistently applied; • suitable for normal times, but founded on the lessons from crises; • built on consensus, but also on the broadest possible engagement; and • utilising appropriately the relative strengths of both regulation (rules) and supervision (oversight). With such a multidimensional set of trade-offs, finding the optimal point for any given set of regulatory proposals is inevitably very difficult. In the case of Basel III, the Committee sought a suitable minimum amount of capital that was “just right” – not so little that the financial system remained susceptible to the weaknesses revealed in 2007–08, but not ... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Basel III, Regulation, Risk and Regulationbasel III,riskregulation,Risk and Regulation, Basel III,Regulation,Risk and Regulation, Keywords:BCBS, Wayne Byers, Capital Adequacy, Basel II, Basel I, LVR BCBS, Wayne Byers, Capital Adequacy, Basel II, Basel I, LVR
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