Basel II: the position of the International Group of Treasury Associations (IGTA)

Representatives of treasury associations world-wide met recently in Slovakia as the International Group of Treasury Associations (IGTA) to discuss, amongst other matters about some of the unintended consequences of the Basel reforms.

While agreeing with the international regulators’ concern that banking activities which have considerably changed over the past years require a more appropriate framework, the IGTA makes the following comments (extracts):


  1. Procyclicality; the proposed framework still contains procyclical elements, i.e. credit will be less available to corporates when they most need it.
  2. Retail bias; the retail business is considered as intrinsically less risky than lending to corporates.
  3. 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;
  4. 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.
  5. Rating issues; the risk matrix for the standardised option does not invite corporates to get a rating.
  6. 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

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