Other market participants are likewise supportive of our efforts to develop an Accord that remains robust, relevant, and responsive to the demands and innovations of modern banking. Work on the proposal is continuing, and the Committee is currently addressing several important issues, including how the revised Accord may affect loans made to small and medium-sized enterprises. Changes since the Second Consultative Paper In countries around the world, and especially in Germany, much has been written about the effects the new Accord may have on the cost of credit for small businesses. I believe that, over the past year, we’ve made substantial progress in finding solutions that should alleviate those concerns for small business owners, regardless of whether they run a small high-tech consulting firm or a “BMW” (“Bäcker, Metzger und Winzer”)-firm. I’d like to focus on changes to the internal ratings-based (“IRB”) proposals that are relevant to small and medium-sized businesses. Changes concerning the treatment of loans to small and medium-sized enterprises include (a) modifications to the capital requirements so that they better reflect the underlying risk; (b) greater recognition of collateral provided by small and medium-sized enterprises; and (c) an adjustment to the capital charges based on a borrowing firm’s size. I will also discuss proposals related to banks’ equity – or venture capital – investments in other firms.
William J McDonough: Bank supervision and credit standards under Basel II – perspectives for SMEs Remarks by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Basel Committee on Banking Supervision, at the Gürzenich Köln, Cologne, Germany, 25 April 2002. *  *  *  Introduction Graf von Hohenthal, Herr Dr. Breuer, members of the panel, “meine Damen und Herren…” It is an honor to join your discussion on the efforts of the Basel Committee on Banking Supervision to ensure that the international rules on capital adequacy serve the needs of twenty-first century banking effectively. What makes this a special privilege for me is the opportunity to meet so many entrepreneurs, owners of small and medium-sized businesses, and others who make up the real engines of the economy. Your interest in the work of the Basel Committee reminds us all that we must look beyond the banking sector to ensure that the foundation we lay provides for the stability and growth of the entire economy. I have long emphasized that the role of supervisors is not to hinder growth or profit, but rather to promote the responsible pursuit of opportunity and innovation. As we improve the rules for bank capital, we must certainly keep this mandate in mind and consider the effects that changes to those rules may have on the economy.