Former United States (US) Treasury Secretary Larry Summers has often been quoted as saying that ‘confidence is the cheapest form of stimulus’.9 However, in an environment of rising inflation and fiscal constraints, it is also likely to be the most effective stimulus currently available. In this regard, further clarity on the modalities of the recovery package recently announced by the President will be important.
These revised market risk amendments would be applied by banking organizations meeting either criterion, whether or not the organization is adopting the credit and operational portions of the Basel II framework. We expect that a small number of banking organizations will remain under the Basel I rules (as amended) but will also compute a market risk charge.