The Basel Committee is consulting on measures to strengthen the regulation and supervision of internationally active banks in light of weaknesses revealed by the financial markets crisis. The changes cover:
- trading book exposures, including complex and illiquid credit products;
- certain complex securitisations in the banking book (such as CDOs of ABS); and
- exposures to off-balance sheet vehicles (ie asset-backed commercial paper conduits).
A separate consultation covers standards to promote more rigorous supervision and risk management of risk concentrations, off-balance sheet exposures, securitisations and related reputation risks. The Basel Committee also plans enhanced disclosure requirements for securitisations and sponsorship of off-balance sheet vehicles, which should provide market participants with a better understanding of an institution's overall risk profile.
It wants to introduce most of the changes by the end of the year, but wait until the end of 2010 for the changes to capital requirements for the trading book.
It wants comments on the proposed enhancements to the Basel II framework by 19 April and comments on the other proposals by 13 March.