BASEL II AND THE COST OF CAPITAL

Thee Basel II proposals on bank capital adequacy put forward by the Bank for International Settlements (BIS) are far-reaching and will have a profound effect on ship finance. There is, however, considerable uncertainty as to how the proposals will be put into effect and it is likely that what has so far been published will be subject to change. There are a number of issues, based on the materials published so far that have still to be more fully addressed and there are potential anomalies and “fault lines” which it is hoped will be ironed out. This article briefly summarizes the existing Basel regime in relation to regulatory capital, highlights certain aspects of the Basel II proposals and attempts to predict some of the effects of the implementation of those proposals in their current form.

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