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Basel II committee gives green light

Basel II, the international accounting standard, has moved a further step closer to its final ratification after consensus was reached on some of its major issues by the Basel Committee on Banking Supervision, a group made up of central bankers and banking regulators.

The fresh framework, to be published at the end of June 2004, confirms that the standardization and foundation approaches within Basel II will be implemented from the year-end 2006, though the more advanced approaches contained in the framework will not get the go-ahead until 2007.

"Basel II introduces a far more comprehensive framework for regulatory capital and risk management than we have ever known," said Jaime Caruana, chairman of the Basel Committee and Governor of the Bank of Spain. "The Committee owes this accomplishment to the tremendous commitment and technical support that banks, central banks, supervisory authorities and academics from around the world offered us. Now that level of collaboration will be invaluable to the prudent implementation of the new framework."

Basel II represents a major revision of the international standard on bank capital adequacy that was introduced in 1988. It aligns the capital measurement framework with sound contemporary practices in banking, promotes improvements in risk management, and is intended to enhance financial stability.

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