The banking supervisors in this country believe that Basel I, the current capital regime adopted in 1988, must be replaced for the largest, most complex banks for three major reasons: (1) Basel I has serious shortcomings as it applies to these large entities, (2) the art of risk management has evolved at the largest banks, and (3) the banking system has become increasingly concentrated.
Shortcomings in Basel I Basel I was a major step forward in capital regulation. Indeed, for most banks in this country Basel I, as we in the United States have augmented it, is now - and for the foreseeable future will be - more than adequate as a capital framework.