24 May 2006

Basel Committee maintains calibration of Basel II Framework

The Basel Committee on Banking Supervision has reviewed the calibration of its capital framework for banking organisations and decided to maintain the current calibration of a 1.06 scaling factor for credit risk-weighted assets. The review was based on the results of the fifth Quantitative Impact Study, and also QIS 4 carried out in some jurisdictions.

The QIS results for the G10 countries show that minimum required capital under Pillar 1 of the Basel II Framework would decrease relative to the current Accord. For Group 1 banks - internationally active and diversified institutions with Tier 1 capital of more than EUR 3 billion - minimum required capital would decrease on average by 6.8%, based on the results for the approach to credit and operational risk that participating banks are likely to adopt after implementation.

QIS 5 results
Of the two internal ratings-based approaches, the advanced approach shows a greater reduction (–7.1%) in minimum required capital than the foundation approach (–1.3%). Minimum required capital under the standardised approach would increase by 1.7% for Group 1 banks. However, very few G10 Group 1 banks are expected to adopt this approach. Group 2 banks show a greater reduction in minimum required capital under all approaches, in particular due to their higher proportion of retail exposures. The results for banks in non-G10 countries show substantial dispersion both within and between countries, mostly due to the specialised business profile of certain banks and particularities in national implementation. To the extent that banks’ risk profiles are similar, their QIS 5 results appear to be broadly in line with the results for the banks in G10 countries.

The Committee intends to publish a detailed report on the outcome of QIS 5 in G10 and non-G10 countries in June 2006.

Press release

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