The Basel 2 agenda for 2009: progress so far

Andrew Cornford, Observatoire de la Finance, Geneva, April 2009

I. Introduction

The revisions of Basel 2, the international standards for banks’ regulatory capital developed by the Basel Committee on Banking supervision to replace the 1988 Basel Capital Accord (Basel 1), are now beginning to take shape. The 2006 text of Basel 2, which was the culmination of a drafting process which began at the end of the 1990s, had been considered closed before the credit crisis which began in mid-2007.[1] This crisis has indicated major shortcomings in the regulatory framework for financial institutions which are now the subject of an agenda of wide-ranging reform[2]. Strengthening Basel 2 is an important item on this reform agenda. (An outline of the Basel capital accords can be found in the Annex to this paper.)