The Basel Handbook
First published:
ISBN: 9781904339557
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Market Discipline and Appropriate Disclosure in Basel II
Lawrence J White
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
This is an excellent time to be addressing issues of financial disclosure for financial conglomerates. After decades of debating an end to the Glass-Steagall and Bank Holding Company Acts’ limitations on banks’ participation in other parts of the financial services universe, the US Congress finally passed the Gramm-Leach-Bliley Act in 1999. Less than three years later, two large financial conglomerates – Citigroup and JPMorgan Chase – received stunning public rebukes for their roles in the accounting and corporate governance manipulations of some of their clients.
Simultaneously, the Bank for International Settlements’ (BIS) Basel Committee on Banking Supervision has proposed a revision (henceforth, Basel II) to its 1988 capital standards, in which “market discipline” – driven by public disclosure – is one of the three “pillars” for strengthening the safety and soundness of banks (see BIS, 1998b, 2000a, 2001b–d, f, h).
This chapter will address the disclosure issues for financial conglomerates principally from the same perspective as that of the Basel Committee: that disclosure is important for the safety and soundness of banks. We will, however, reach substantially
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