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south-north development monitor SUNS [Email Edition]

SUNS #4444, Monday, 31 May 1999


contents

Finance: BIS study confirms some perceptions of Basle accord (Chakravarthi Raghavan, Geneva)

Health: Environment factors linked to nerve disorders (IPS, Washington)

Latin America: Citizens demand controls on pesticides (IPS, Santiago)

Yugoslavia: Indictment of Milosevic opens a pandora box (IPS, Hague/Washington)

Europe: War likely to prompt revision of borders (IPS, Budapest)

Trinidad & Tobago: Traditional healers seek recognition (IPS, Port of Spain)

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Some excerpts from selected articles:

Finance: BIS study confirms some perceptions of Basle accord

Geneva, 28 May (Chakravarthi Raghavan) -- The pressures on banks to increase their capital to meet the minimum capital requirements under the Basle accord may have resulted in banks cutting their bank lending in cases where it would be too costly to raise new capital, according to a working paper of the Basle Committee on Banking Supervision.

The paper, 'Capital Requirements and Bank Behaviour: The Impact of the Basle Accord," has been prepared by a working group of the Basle Committee whose secretariat is at the Basle Bank of International Settlements, and in general appears to bear out some of the perceptions of analysts about the outcome of the Basle Committee requirements in the financial crisis.

The working group considered two major questions:

* firstly, whether the adoption of fixed minimum capital requirements led some banks to maintain higher capital ratios than would otherwise have been the case and whether any increase in ratios was achieved by increasing capital or reducing lending;

* secondly, whether the fixed capital requirements have in fact been successful in limiting risk-taking by the banks relative to capital as intended, or whether banks have been able to take actions to reduce their effectiveness either by shifting to riskier assets within the same weighting band or through capital arbitrage.

The 1988 Basle Accord for common capital requirements has been adopted by the G-10 countries, and is now being implemented in some 100 countries around the world.

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