The interaction between the private and public sectors in the development of risk-management techniques has been particularly extensive in the field of bank capital regulation, especially for the banking organizations that are the largest, most complex, and most internationally active. The current system of bank capital standards is the so-called Basel I framework, which was established internationally in 1988.
Basel I was an important advance that resulted in higher capital levels, a more equitable international marketplace and - most relevant to my theme this evening - closer links between banks' capital holdings and the risks they take. However, as I will discuss, Basel I is becoming increasingly inadequate for our largest and most complex organizations.