And although banks sometimes criticise the higher capital requirements, a more stable financial system is beneficial for them as well – as greater stability is also reflected in lower funding costs. Nevertheless, in contrast to the original plans, there was no final agreement on Basel III last year. While most of the residual work has been completed, one important issue still remains unresolved.
This is the question of how far credit institutions should be permitted to use their own internal models to determine their capital adequacy requirements for credit risk – or to be precise, whether to fix a lower threshold for capital adequacy requirements calculated with the aid of the internal model and if so, how to calibrate this threshold.