The first is a reworked version of the accord, which aims to make the present four "risk buckets" more attuned to loans' riskiness, and adds a fifth for especially risky credits.
My gripe with economists is not that their models don't work well – they don't, look at the role of central banks in the financial crisis – but that they seem so reluctant to acknowledge the riskiness of their advice.
It said: Operational estimates remain unchanged for now, despite the 'extended' uncertainty or riskiness of its production curve well into 2018.
The latest revision has been sent out for final consultation, and is due to come into force in 2004.The trouble with the Basle rules is that the weightings are crude, even misleading (for example, South Korea and Mexico are ranked with all other OECD countries for credit riskiness), which sometimes produces perverse effects.
GE's new interest costs reflect more accurately the true riskiness of the company, argues Mr Gross.
It could be argued, however, that this accounting presentation misstates the true allocation of capital at GE, or understates the true riskiness of GE Capital.
To reduce the riskiness of their portfolios and to hold down the probability of default, banks will tighten their lending conditions.
Then they could borrow only at interest rates that reflect their true riskiness, forcing them to cut lending.
If back-up credit lines could be priced to reflect the riskiness of loans and the cost to banks' balance sheets, then banks might yet make money out of them.
If bankers believe that regulators will not let their institutions collapse, they may not worry enough about the riskiness of their assets.A third reason stems from the way in which financial crises happen.
A shortage of longer-term funding also contributed to an increase in the riskiness of the whole financial system, since banks were being forced to rely ever more on short-term financing that needs to be rolled over.The flood of money being pumped into banks by the ECB goes a long way towards easing these funding pressures.
