Double-counting fears ease as w -factor is removed from Basel II capital charge

BASEL - The so-called w -factor that bankers feared could result in double-counting of op risk under the Basel II bank capital accord will be removed from the capital charge provisions of the accord, global banking regulators said in September.

Instead the residual risk represented by the w-factor will be monitored under the second pillar - supervision by bank regulators - of Basel II's three-pillar structure.

The w-factor was intended to cover certain risks relating to collateral and credit derivatives under the capital charge for credit risk proposed under Basel II. By some interpretations, the w-factor was a charge for legal risk, which falls within the Basel II definition of op risk. Banks might therefore have faced capital

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