Outlook on Basel II
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The new revisions to the Basel Accord present opportunities as well as challenges to the banking industry. The purpose of this paper is to explore the ramifications of the revisions and ponder potential reactions from practitioners. Research was based on journal, database and newspaper articles as well as recently published books exploring the issue. The new accord is expected to reduce capital holding costs for banks that conform to the regulation. Its long term effect may force banks to become more specialized and tender to a less broad customer base. The imbedded flexibility in the updates allows banks to choose methods that are most beneficial for its long term survival. The accord opens opportunities for banks to explore new products while aligning its capital holdings more closely to its risk portfolio.