Supervisor of Banks, Rony Hizkiyahu, is pushing ahead with the plan for Israeli banks to adopt and implement the Basel II capital accord from the beginning of 2009, in an effort to improve risk management and capital adequacy in the financial system. Hizkiyahu, who has sent a draft directive to the banks ordering them to prepare and commit themselves to fully implement Basel II in less than two years time, announced on Wednesday that he and his department will hold a series of meetings over the next couple of months with representatives of the banks and other bodies to assist them with information and guidelines in order to ease the transformation and adoption of the new system. Basel II, or the new Basel Capital Accord, lays down guidelines for determining the minimum capital requirements for banks and tightens the link between credit risk and capital allocation or capital adequacy. These guidelines, which are planned to be adopted by 49 countries, provide a system of models for weighting credit and operational risks run by banks in their loans to retail and corporate customers. Capital adequacy ratios of Israeli banks have been just above 10 percent. Yet, even though this figure is above the minimum 9% required by the Bank of Israel, it is still low on an international comparison. In most European countries similar to Israel in terms of population and GDP, the capital adequacy ratio stands at 12-13%, with the minimum requirement being 8%. The significance of this ratio is that it expresses the ability of a bank to deal with most of the expected financial losses in doing business with customers. As such, a higher capital adequacy ratio means that the bank has a "safety cushion" large enough to cover expected losses. Dov Halperin, CEO of the Halperin Consulting Group, which assists banks and large corporations in Israel in implementing advanced information systems in the risk management market, estimated that implementing Basel II would cost an Israeli bank between $6 million and $10m. and would take two to three years.