Risk-based approach "remains the foundation" of bank capital, says Basel Committee's Byres

Risk-based capital creates right incentives for banks, according to head of Basel Committee secretariat - but critics claim supervisors are making models less risk-sensitive

A risk-based approach to prudential regulation is still the best way to encourage self-discipline among banks - although it needs to be accompanied by simpler, limit-based rules, according to Wayne Byres, secretary-general of the Basel Committee on Banking Supervision.

The use of internal models in calculating capital requirements has been a controversial topic since the unprecedented losses announced by banks during the first phase of the crisis, and regulators have since clamped down on models