The New Capital Adequacy Framework - Institutional Constraints and Incentive Structures

by Cem Karacadag

This paper develops a conceptual framework for assessing the major reorientation in bank capital adequacy regulation proposed in the Basel Committee's New Capital Framework (NCF) consultative document.2 The NCF document outlines a series of measures which, taken collectively, amount to a fundamental revision to the Committee's 1988 Capital Accord ("Accord"). Intended only to apply to internationally active banks, and representing an informal agreement between the central banks and bank supervisory agencies of the G-10 countries, the Accord has since become accepted as the de facto universal international standard for assessing banks' capital adequacy. Thus, a proposal to revise the Accord is a matter of immense significance for the international financial system.

42 pages, Kindle Edition

First published June 1, 2000