The Basel Handbook
First published:
ISBN: 9781904339557
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Basel II Capital Adequacy Rules for Securitisations
Vandana Rao
Development and Validation of Key Estimates for Capital Models
Explaining the Correlation in Basel II: Derivation and Evaluation
Explaining the Credit Risk Elements in Basel II
Loss Given Default and Recovery Risk: From Basel II Standards to Effective Risk Management Tools
Assessing the Validity of Basel II Models in Measuring Risk of Credit Portfolios
Measuring Counterparty Credit Risk for Trading Products under Basel II
Implementation of an IRB-Compliant Rating System
Stress Tests of Banks’ Regulatory Capital Adequacy: Application to Tier 1 Capital and to Pillar 2 Stress Tests
Advanced Credit Model Performance Testing to Meet Basel Requirements: How Things Have Changed!
Designing and Implementing a Basel II Compliant PIT–TTC Ratings Framework
Basel II in the Light of Moody’s KMV Evidence
Basel II Capital Adequacy Rules for Retail Exposures
IRB-Compliant Models in Retail Banking
Basel II Capital Adequacy Rules for Securitisations
Regulatory Priorities and Expectations in the Implementation of the IRB Approach
Market Discipline and Appropriate Disclosure in Basel II
Validation of Banks’ Internal Rating Systems – A Supervisory Perspective
Rebalancing the Three Pillars of Basel II
Implementing a Basel II Scenario-Based AMA for Operational Risk
Loss Distribution Approach in Practice
An Operational Risk Rating Model Approach to Better Measurement and Management of Operational Risk
Constructing an Operational Event Database
Insurance and Operational Risk
INTRODUCTION
One of the motivations for Basel II had been the fact that the lack of risk-sensitivity in the capital-adequacy rules under Basel I has prompted many banks to do “regulatory arbitrage” mainly through securitisations. Regulatory arbitrage is the avoidance of minimum capital charge through sale or securitisation of a bank’s (high-quality or highly diversified) assets, for which the true risk and the capital requirement imposed by the financial markets is much less than the regulatory capital requirement. From this perspective, developing the right capital rules under Basel II for securitisation tranches becomes all the more important.
The Basel Committee on Banking Supervision (BCBS) had been in a consultation period with regulators, banking practitioners and academics for several years before the actual finalisation of the Basel II Accord. These deliberations were through a series of consultative papers and working papers. There is hardly any aspect of Basel II that has undergone more changes and evoked more active discussions than the capital-adequacy rules for securitisations. The first consultative paper issued in 1999 at the very beginning of the Basel II process
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