The intention is to achieve implementation as closely as possible to the G10 schedule. Examples of tricky issues to be considered with care are: how to (or whether to) apply operational risk requirements for smaller institutions; how to carry out the validation of internal models for both market risk (we still do not allow banks to use them for capital purposes) and IRB; how to encourage more complex banks to adopt IRB. There are, however, more pressing priorities for Brazilian supervision at present, such as the improvement of recently implemented processes of risk focused supervision, the consolidation of the New Credit Information System, the studies underway for the introduction of a supervisory rating system geared towards the determination of the adequate frequency and intensity of supervision for each particular financial institution/conglomerate and the definition of strategies for consolidated supervision and international co-operation. The New Accord will be most likely implemented in Brazil in a gradual manner, the new rules co-existing for a while with the old ones. This will be the case, for example, of the smaller banks, to which will be applied either the simplified standardised approach, which does not depend on external credit assessment institutions, or the current approach. One possibility is the application of the current approach with slight modifications, such as a review of the present weights and the incorporation of some innovations from the standardised approach. For these less complex institutions, the capital requirement for operational risk might not be explicit, but only covered under Pillar II.
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