The Basel Committee has spoken on the multiple aspects of strengthening bank capital, which not only consists of increasing its quality and quality, but also ensuring that ratios are consistent and reliable, in that they can be compared around the world. To achieve this, the Basel Committee foresees a series of incremental and supervisory changes that could involve:

  • benchmarking that leads to national supervisory action against outlier banks;
  • assessment of regulatory consistency across jurisdictions, including of divergences arising from the use of national discretions, the Pillar 2 supervisory process and model approval;
  • enhancements to Pillar 3 disclosures; and
  • introduction of constraints on modelling, which could involve increasing data requirements, limiting assumptions and imposing floors.

The preferred policy mix will be such that increases the robustness and credibility of bans' risk measurement methods without reducing their incentives to deepen their understanding of risk. (Source:Strengthening Bank Capital – Basel III and Beyond)