In June 1999, the Basel Committee on Banking Supervision announced plans to revise the capital standards for banks. The Basel Committee believes that the project loans were significantly riskier than corporate loans and, therefore, justify the high capital expenditure in accordance with the new proposal (known as Basel II). Bankers fear that higher costs of capital could damage project lending by reducing profits and driving borrowers nonbank competitors have formed a consortium to resist the suggestion of studying the actual default and loss characteristics of their combined portfolios loans. The study showed that the project loans were riskier than corporate loans. Armed with this data, the consortium sent a letter to the Basel Committee in August 2002, calling on them to reduce the proposed capital loans, project financing. "Hide
by Benjamin C. Esty, Aldo Sesia Source: Harvard Business School 23 pages. Publication Date: December 5, 2002. Prod. #: 203035-PDF-ENG
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