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In a December 2016 speech, the chairman of the Basel Committee on Banking Supervision, Stefan Ingves, commented on the issue of complexity in the capital adequacy framework. He associated the existence of complex capital rules with the decision to adopt banks’ internal models for capital calculations with a view to greater risk sensitivity. But he cautioned that complex rules can also have adverse consequences, as they inhibit the effective oversight of risk-taking both from a supervisory and a management perspective.

Complexity also limits the ability of a wider set of stakeholders to contribute to the development of policy, Mr. Ingves added. He acknowledged the axiom that the implementation of complex rules is itself complex, creating challenges for banks in the design of the necessary systems and controls.

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