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Basel II

The new Capital Accord, known as Basel II, which the Basel Committee on Banking Supervision approved at the end of June 2004, aims to strengthen the security and reliability of the financial system, promoting fairer competition and providing for more comprehensive measurement of risks. It is directed at banks operating internationally, but its basic principles are intended to be applied to small and local banks as well. In addition to the one existing pillar of minimum capital regulations (Pillar 1), the accord now also includes two further elements: the supervisory procedure (Pillar 2) and market discipline (Pillar 3). It also views operational risks separately from credit risks, and requires institutions to underpin them by equity capital. The new regulations reflect the progress international banks have made in the area of risk management, and their criticisms of the current rules. The accord will enter into force on a staggered basis: the simple procedures will be introduced at the beginning of 2007 and the complex procedures at the beginning of 2008. Basel II will be implemented punctually in Switzerland as well, not least on competition grounds. To this end, the Banking Ordinance will need to be amended and new Circulars produced. It will not be necessary to alter the Banking Act, however. A national working group composed of all those directly affected by Basel II under the lead of the Swiss Federal Banking Commission is currently producing the texts of the new regulations.
Further information
Info kits Basel II
Helpful Links
The Basel Committee on Banking Supervision