US FDIC produces second Basel analysis paper

The US's Federal Deposit Insurance Corporation has published its second study of the Basel Accord revisions, titled Risk-based capital requirements for commercial lending: the impact of Basel II .

The study explores the mechanics of risk-based calculation of commercial credit exposures under the Basel II revisions, and shows that the impact of the revisions on regulatory capital for syndicated loans depends heavily on the method that banks use to estimate future recovery rates on defaulted loans. “This illustrates the importance of regulatory decisions about the validation of banks’ internal risk estimates under Basel II,” the paper says.

The paper goes on to say that the Basel II

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