Basel II Plan Under Attack for Impact on Costs, Funding

The draft Basel II proposals on risk regulation have been attacked by two industry bodies in the past month. First, the Institute of International Finance (IIF) expressed concern about the potential costs to industry participants of accommodating what it called the complexity of the proposed new framework, and said there was a lack of coordination between the Basel Committee and the International Accounting Standards Board. Then, the European Private Equity & Venture Capital Association estimated that the risk provisions of the proposed regulations would reduce the flow of equity finance in Europe by between €5 billion and €10 billion. The Basel II proposals are seen as a major driver of financial services firms’ straight-through-processing initiatives, which in turn are driving demand for reference data management projects. The latest criticisms of the Basel II proposals follow earlier warnings from the European Banking Federation, the British Bankers’ Association and the U.S. Securities Industry Association.