This paper outlines a different approach than the Market Risk Amendment to determining capital adequacy for banks.  Charles Taylor argues that good capital adequacy standards for banks should encourage good risk management as well as establish minimum prudential levels of capital.  It proposes a new approach which is based on the idea that the amount of capital a bank needs is related to the value it has at risk - the uncertainty about future asset and liability values and the value-added in its future activities.

Taylor also discusses how to phase in this approach and comments that the Basel Committee should consider revising its approach to setting capital standards.