The 'OECD club rule' in bank risk-based capital adequacy : implications for Malta and other small states

Abstract

This chapter explores one particularly controversial area of the accord which the Basle Committee is under pressure to re-examine: the so-called 'OECD1 Club rule'. It will evaluate the claims by bankers that the rule is to blame for certain market distortions and assess whether, as a result, it effectively hinders the capital accord from achieving its level-playing-field objectives. The rule's implications for the financial operations of entities operating in small states will then be examined, with particular reference to the case of Malta. This is followed by suggested alternative approaches to the rule which would still reflect country risk-based principles.