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Basel II


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Background
Basel II is an international initiative that requires financial services companies to have a more risk sensitive framework for the assessment of regulatory capital.

The Basel Capital Accord sets international capital adequacy standards. In 1988, the Basel Committee on Banking Supervision established a method of relating capital assets, using a simple system of risk weights and a minimum capital ratio of 8%.

The planned implementation date for Basel II is December 2006 with parallel running from January 2006. Banks, academics and politicians, particularly in the USA are demanding changes to the draft rules, which they believe are too complex, overly prescriptive and costly. These changes may in turn cause delays to the implementation of the final Accord.

Basel II is based on the concept of 3 Pillars.

Basel II and Basel III not only affect traditional finance companies, but they also influence other areas such as the cost of project finance for Infrastructure Projects. You can read more here on Basel III and Infrastructure.




















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