A third factor linking housing wealth and consumption is the effect of realized capital gains, accrued either by selling one's house or by borrowing through a home equity loan. As Chairman Greenspan has noted, accumulated home equity is not itself a liquid asset. In addition, its value is somewhat uncertain, although general trends in real estate prices can be easily observed.
Several options – the Simple Standardized, the Standardized, Foundation and Advanced approaches – have accordingly been formulated in the menu of options available to accommodate a progressive adoption of Basel II. One of the direct impacts of Basel II adoption will be the wide scale use of quality information, data warehousing and credit risk modelling with a view to improving risk management by banks.