Some 30 countries are expected to take part between October and December in the planned fifth test of the complex, risk-focused Basel II bank capital rules that are designed to make the worldâs banking system safer.
Bankers and their regulators around the world will be anxious to see to what extent, if any, this international test will reflect the findings that so worried US regulators when they carried out their own national testing of the rules on US banks last year and earlier this year. The US results showed that the capital held by the 26 participating banks to absorb surprise losses could fall significantly, under proposed Basel II formulas, from the levels required under the current, and simpler, Basel I capital adequacy rules.
But German regulators say that a similar national test they carried out this year showed no evidence of the problems encountered by their US colleagues. Germany, along with the other 24 member states of the European Union, will be applying Basel II to all banks and investment firms. EU institutions will be able to choose between the simpler, intermediate and advanced approaches to measuring their credit and operational risks that are offered under the regime. The US plans to apply Basel II only to its largest banks, estimated at 20 or so but comprising the bulk of the nationâs banking assets. The US Basel II banks will be allowed to use only the most advanced approaches.