While agreeing with the international regulatorsâ concern that banking activities which have considerably changed over the past years require a more appropriate framework, the IGTA makes the following comments (extracts):
- Procyclicality; the proposed framework still contains procyclical elements, i.e. credit will be less available to corporates when they most need it.
- Retail bias; the retail business is considered as intrinsically less risky than lending to corporates.
- International level playing field; Basel II will apply to all financial institutions within the EU whereas only 10 US banks will have to adopt the system; big countries like China or India have already turned down its application;
- Regulatory arbitrages; the implementation at national level might turn out to be different from one country to another due to the complexity of the construction.
- Rating issues; the risk matrix for the standardised option does not invite corporates to get a rating.
- Alignment IAS/Basel II; the definitions of basic concepts are different between IAS and Basel II.
For the full statement, please click on http://www.igta.org/downloads/igta_basel2.pdf