Tougher BASEL II requirements ( Say good by CDO SQUARED)

http://www.bis.org/press/p090713.htm

The Committee is issuing supplemental guidance under Pillar 2 (the supervisory review process) of Basel II. This guidance addresses the flaws in risk management practices revealed by the crisis. It raises the standards for:

* firm-wide governance and risk management;
* capturing the risk of off-balance sheet exposures and securitisation activities;
* managing risk concentrations; and
* providing incentives for banks to better manage risk and returns over the long term.

The supplemental guidance also incorporates the FSF Principles for Sound Compensation Practices, issued by the Financial Stability Board (formerly the Financial Stability Forum) in April 2009. The Committee, through its Standards Implementation Group, will begin work immediately on the practical implementation of these principles.

The Basel II package includes enhancements to the framework's third pillar (market discipline) to strengthen disclosure requirements for securitisations, off-balance sheet exposures and trading activities. These additional disclosure requirements will help reduce market uncertainties about the strength of banks' balance sheets related to capital market activities.

Banks and supervisors are expected to begin implementing the Pillar 2 guidance immediately. The new Pillar 1 capital requirements and Pillar 3 disclosures should be implemented no later than 31 December 2010. The Committee also agreed to keep in place the Basel I capital floors beyond the end of 2009.