US Federal Reserve chairman, Mr Alan Greenspan, yesterday called for a "multitrack" approach to address changes in the capital rules governing banks.

Mr Greenspan complained that inconsistent and arbitrary treatment of risk in the international banking system had seriously undermined the credibility of capital requirements. International standards for bank capital had encouraged bank transactions that reduced regulatory capital requirements more than they reduced a bank's risk position.

"The fundamental credibility of regulatory capital standards as a tool for prudential oversight and prompt corrective action at the largest banking organisations has been seriously undermined," he told bankers in Phoenix, Arizona. Proposals from the Basle committee of international banking supervisors, published in April, would apply a more elaborate version of the old rules for calculating how much capital a bank needs to hold as a cushion against risk.

The proposals have, however, been widely criticised for not making fine enough distinctions between different risk categories.