The continuing saga – Basel II developments: bank capital management in the light of Basel II – how to manage capital in financial institutions

Capital is key to any financial institution. Companies in other industries need capital to buy property and production equipment. For financial institutions, the primary function of capital is to cover unexpected credit and market risks losses, because risk of such losses inevitably accompanies a bank’s core business of lending money and making markets. David Rowe, Dean Jovic and Richard Reeves explain why it is crucial for financial institutions to build an advanced economic capital framework and how that plays into current initiatives to implement the Basel II Capital Accord.