Global banking regulators are reducing the discretion that national regulators have in applying certain aspects of the Basel capital adequacy rules.
The Basel Committee on Banking Supervision has decided to reduce the latitude that national regulators have to adapt the Basel capital framework. While the global capital rules allow for discretion to reflect differences in local financial systems, the committee notes that this can also impair comparability across jurisdictions, and increase variability in the calculation of risk-weighted assets.
As a result, regulators have decided to eliminate certain national discretions, including the treatment of past due loans, the definition of retail exposures, and credit rating standards for wholesale exposures.
The committee notes that it will continue to monitor the issue of national discretion in other areas, and that it will consider removing other elements of discretion from the framework.