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October 15, 1998


Available is a special issue of the Federal Reserve Bank of New York's Economic Policy Review, which is devoted to the proceedings of the conference Financial Services at the Crossroads: Capital Regulation in the Twenty-First Century. The conference, which was co- sponsored by the Federal Reserve Bank of New York, the Bank of England, the Bank of Japan, and the Federal Reserve Board of Governors, took stock of the existing system of bank capital rules and identified key objectives for the future development of capital regulation.

Speakers at the conference included Federal Reserve Chairman Alan Greenspan; Chase Manhattan President Thomas Labrecque; Deutsche Bundesbank Board Member Edgar Meister; and Tom de Swaan, who at the time of the conference was the Chairman of the Basle Committee on Banking Supervision and Executive Director of De Nederlandsche Bank.

Many views were expressed by conference participants on a variety of subjects. However, a consensus did emerge on three important points:

  • The increasing sophistication of the risk management procedures now used by financial institutions requires corresponding refinements in supervisory practice. Regulatory capital requirements must evolve in line with advances in industry methods of quantifying risk and allocating capital.
  • The growing specialization of financial institutions is making "one-size-fits-all" capital requirements increasingly ineffective. The existing structure of rules should be modified to take into account the differing risk profiles and characteristics of individual institutions.
  • Given the rapid evolution of financial markets and their technology, improving the current system of bank capital standards is and will continue to be a pressing responsibility for supervisors.

Specific topics addressed in the conference papers included the impact of capital rules on bank risk taking, industry approaches to monitoring risk, capital standards for bank in emerging economies, and proposals for reforming the regulatory framework put in place by the Basle Accord of 1988.

Contact: Douglas Tillett

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