The Basel Committee has laid out not just general principles for capital disclosures, but also proposed an array of new ones large banks would need to make to demonstrate their compliance with the Basel III Accord and an array of related global requirements. Importantly, the nature of the consultation suggests that Basel has — if not abandoned — then at least significantly delayed efforts to impose benchmarks, floors, or other binding constraints on the way risk-weighted assets (RWAs) are calculated. This will permit continued reliance on RWAs, including those based largely on internal models, with market discipline based on these new disclosures the approach Basel anticipates will reduce undue discretion and even regulatory arbitrage. However, a second phase of this project will not only add a series of additional disclosures, but perhaps also reconsider this benchmarking question.
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