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Article: Basel II: a new capital framework.(ARTICLES)
- Article from:
- The Reserve Bank of New Zealand Bulletin
- Article date:
- September 1, 2005
- Author:
CopyrightCOPYRIGHT 2005 Reserve Bank of New Zealand. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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This article provides an introduction to the new Basel II Capital Framework (Basel II) and the Reserve Bank's approach to its implementation in New Zealand. Bank capital plays an important role in absorbing unexpected losses. Regulators have an interest in the amount of capital held by banks and set some minimum capital adequacy requirements for banks. Basel II replaces the current regulatory requirements and provides a new framework for thinking about capital's role in banking and how capital requirements should be calculated. The main objectives of Basel II are to increase the sensitivity to risk of regulatory capital requirements, and to provide incentives for banks to ...