Abstract
The Basel Committee’s proposals for a new capital adequacy framework aim to align regulatory capital more closely with underlying economic risk. The Committee has proposed a new standardized approach to the risk weighting of banking book assets, which would place greater reliance than the current Accord on external credit risk assessment. The Committee has established the requirements that specialized agencies must meet for their ratings to be used in determining capital ratios for banks. The standards refer to agencies’ credibility and independence as well as to the objectivity and transparency of their judgments. Rating agencies must also show a satisfactory track record.
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