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The Actuary The magazine of the Institute & Faculty of Actuaries

Basel 2 agreed at last

After five years of debate, the 13 banking supervisors represented on the Basel Committee on Banking Supervision finally reached agreement on the accord to replace the current Basel accord near the end of June. Basel 2 is to be implemented in 2007. Commentators continue to debate whether and how Basel 2 will promote stability and competition in global banking. Nevertheless, it appeared that something of the order of 100 countries would want to subscribe to the new accord, even if several significant newer markets had to acknowledge that it would be several years before they were ready.

We will not try here to summarise a document of more than 250 pages, but the new accord should be of real interest to actuaries, both in its own right and because insurance solvency supervision will follow a similar framework. Many of the techniques envisaged by Basel are very recognisable, particularly to actuaries familiar with general insurance. Basel is also a significant commercial opportunity, with major banks expected to spend upwards of £25m each on development of data warehouses and risk models.