By Robert Paterson, ABS Research, Morgan Stanley Dean Witter

The Basel Committee published a second consultative package on the New Basel Capital Accord on Jan 16. Readers will remember the committee is working to modernize the current system of risk weightings that is contained in the 1988 Basel Capital Accord. The package develops the theme of a two stranded approach to calculating capital requirements: either according to a set of standardized ratings based risk weightings, or the bank's assessment of the exposure's default risk, as was outlined in the first set of proposals entitled A New Capital Adequacy Framework, June 1999.

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