Basel Committee Consultative Paper Last year’s consultative paper set out a new paradigm for judging capital adequacy based on a set of three so-called pillars. Pillar I is sound minimum capital standards or, in essence, the existing Accord with improvements. Pillar II is supervisory oversight of capital adequacy at individual banks, and pillar III is market discipline supported by adequate public disclosures by banks.
The third area of improvement has to do with the nexus between inflation, wages and the real economy.