Naturally, as prudent supervisors, the members of the Committee know that it is easier to enforce a simple rule than a more complicated one. Wherever possible, the Committee has sought to provide simple alternatives that can be applied in many markets and settings. Consultations helped us to simplify or remove a good number of rules thought to be unnecessarily complicated. However, it’s important to recognize that we intend to apply the New Accord especially to large, internationally active banks, all of which are highly developed and complex institutions. One blanket won’t cover a mountain range. In fact, the New Accord’s complexity stems partly from the options it provides to address the wide range of risk profiles, strategies, and systems that banks maintain. Many options were created precisely because some banks felt disadvantaged under a proposed blanket rule. Yet each new option alters the balance between simplicity and complexity. I think the best example of finding that balance lies in the treatment we’ve proposed for exposures to small and medium-sized enterprises. Equating loans to small and medium-sized businesses with loans to large corporations ignores critical aspects of the risks associated with each type of lending; it also could lead to results that seem unfair to banks that lend primarily to smaller businesses. So the Committee developed a special capital treatment for exposures to small and medium-sized enterprises that recognizes the unique characteristics of that form of lending, but admittedly makes the rules more complicated, and perhaps a page or two longer.
As you know, since the Second Consultative Document’s release 21 months ago, the members of the Basel Committee have worked collaboratively and publicly with supervisors, banks, and others to revise the proposals so that they best serve the needs of modern banking. We’ve published and discussed thousands of pages of proposals and studies with the industry and the public. The size of – and depth of detail in – those volumes demonstrates how hard we’ve been working and how great the challenge is. Challenges the Committee is resolving Indeed, while our consultations over the years have reflected on some of the finest – and occasionally highly esoteric – points of contemporary banking, the Committee encountered a few central concerns expressed by the industry – and sometimes by supervisors as well. Some of the overarching issues include the complexity of the proposals and their potential to be "procyclical." Other respondents have weighed in on proposed charges against operational risk and other particular exposures. I’d like to share with you now the latest news on how we are resolving those challenges. BIS Review 52/2002  3  Complexity of the New Accord First, to the issue of complexity. Anyone who’s dared to download the proposals in their entirety from the BIS website may have been surprised to find out how much paper it requires to print them out. The New Accord is truly weighty, in all meanings of that adjective.