Now in prospect is a major revision of international bank capital regulations that would embody recent advances in credit risk measurement and management. Previous regulations have been simpler in structure, with a primary goal of getting capital requirements right on average, and thus have...

Other risk-inviting rules historically have involved government-imposed structural constraints on banks, which include entry restrictions like unit banking laws that constrain competition, prevent diversification of risk, and limit the ability to deal with shocks. Another destabilizing rule of...

Since banking systems play a crucial role in maintaining the overall health of the economy, the adverse effects of poorly supervised systems may be quite severe. Without some form of vigilant external oversight, banking systems could fall prey to excessive risk taking, moral hazard, and...