Since the Madrid meeting of the Basle Committee on Banking Supervision in October, a new realization has dawned on the senior managements of banks around Europe and the rest of the world. The Basle II accord will go ahead - having looked in doubt at various times this year - and the time is fast approaching when banks must move beyond arguments over complexity, pro-cyclicality and inappropriate incentives. They must start implementation.
Everyone agrees that the original Basle accord of 1988, with its very crude assessments of credit risks and associated capital requirements, urgently needs updating. But that's where agreement ends.
Many complain bitterly about the complexity of the new rules and the danger that regulators will be ill equipped to implement them. In March, US comptroller of the currency John Hawke grumbled at the hundreds of pages of draft regulations littered with mathematical formulae: "They're not written by or for bankers - or for that matter by or for conventional bank examiners," he said. "They're written by mathematicians and economists for mathematicians and economists."
Policymakers worry that banks will be encouraged to lend too much in boom times when ratings are strong and regulatory capital light, and cut back lending in a recession as credit ratings fall.