Book extract > Regulatory Use of Credit Ratings: Implications for Banks, Supervisors and Markets

Barbara C. Matthews is Banking Advisor and Regulatory Counsel to the Institute of International Finance, Inc. (IIF). The views presented in this chapter, however, are her personal views and do not necessarily represent the views of the IIF or its members. Since 2000 banks and their supervisors have worked to create a new kind ofcapital framework that would better align the capital that regulators requirebanks to hold to cover the risks that they incur. Regulatory capital standards areset by an internationally-agreed document known as the “Basel Accord”, originallypromulgated in 1988. This document, agreed by the Group of Ten (G10) bankingsupervisors operating under the aegis of the Basel Committee on BankingSupervision, establishes common international standards for the definition ofregulatory capital and the method by which the adequacy of capital is evaluated forinternationally-active commercial banks.

Credit Ratings: Methodologies, Rationale and Default Risk
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