Basel II

The New Basel Capital Accord (Basel II) will be one of the drivers behind the biggest overhaul in prudential supervision since the original Capital Accord of 1988. The proposed changes will have fundamental consequences for the way affected firms conduct their business, significantly impacting systems, operations, resource planning and pricing, says Vishal Vedi of Deloitte & Touche’s Banking Group, tel: 020 7303 6737 vvedi@deloitte.co.uk.

Basel II aims to improve safety and soundness in the financial system through a better alignment of capital to the risks run by a financial institution. It will achieve this by placing more emphasis on institutions’ internal controls and management, the role of the supervisor and market discipline. The new framework intends to provide approaches that are both more comprehensive and more sensitive to risks than the 1988 Accord, while maintaining the overall level of regulatory capital in the banking system.