Newsletter Jan 2008: Regulators to monitor Basel II cyclicality closely

LONDON – Regulators are promising to monitor closely the extent that banks’ capital requirements vary across the economic cycle following the adoption of the Basel II risk-based capital rules by the majority of major banks in the EU, and elsewhere, from the start of 2008. Analytical research suggests that capital requirements could rise and fall sharply with economic booms and busts, and this could have the affect of exacerbating the cycle.