Thus, for example, a loan to a very risky “junk bond” company gets the same weight as a loan to a “triple A” rated firm.
While the Accord has the virtue of being relatively easy to administer, it also clearly gives banks an incentive to sell or not to originate loans that their internal models say need less capital than is required by the Basle Accord. Conversely, banks are encouraged to book loans that their models say require more capital than does the Basle standard.