The final version of the Basel II capital accord has been criticized by the Institute of International Finance (IIF), the global association of financial institutions, over concerns that its proposed implementation across international markets will not be sufficiently consistent.
Although the IIF commended the Basel Committee for showing 'intellectual leadership', IIF Managing Director Charles Dallara added: "The Basel Committee clearly recognizes that smooth collaboration between the home and host supervisors of each institution is crucial for the Accord's success, as is good international coordination on all implementation issues. In addition, it is also important that the review of each bank under Pillar 2 of the Accord not only address specific supervisory concerns but also promote consistency on fundamental aspects of the Accord.
The document, which has been worked on intensively by the world's regulatory authorities for almost six years, will provide a new blueprint for financial services supervision. Although the document has no legal force, it is essentially a "gentleman's agreement" between governmental authorities and countries are already lining up the necessary regulatory text and resources to implement Basel II.
Basel II will impact both banks and corporates. For banks it means increased supervisory scrutiny as well as a huge investment in credit risk evaluation tools.