Third, the balance sheets of euro area banks and insurance companies have also continued to strengthen. 4  BIS Review 86/2005  At the same time, these positive developments are clouded by the fact that risks and vulnerabilities are also growing (see slide 12). Global imbalances have continued to widen.
Some community bankers in particular have expressed concerns about the competitive impact of the Basel II capital accord on non-Basel II banks, particularly for residential mortgages and retail and small-business loans. In response, the Federal Reserve has conducted a number of studies on whether Basel II will create significant market distortions for the vast majority of banking organizations that remain on Basel I.