Capital requirements
The capital calculation question
Industry comments on Basel II have concentrated most on corporate credits. But the modelling of retail portfolio risk is a new field, and there is much greater scope for disagreement about how capital should be calculated.
Sponsor's article > Expected Positive Exposure: Achieving Basel II Compliance Strategically
Enhancements to Algo Capital provide robust and realistic EPE values for counterparties across the trading book, while taking into account complex forms of credit mitigation.
Rating properties and their implications for Basel II capital
Internal ratings
PD estimates for Basel II
One of the main issues banks will have to face to comply with the new Basel II internal ratings-based approach is to prove that the long-run average probabilities of default they assign to their clients, which will be used as the basis for regulatory…
The Road to Compliance
In the race to meet new regulatory compliance, CIOs have their hands full. How close are they to the finish line?
A capital solution
Securitisation appears to offer clear regulatory capital benefits to owners of life insurance companies. Will other European banks follow Barclays' lead?
PD estimates for Basel II
One of the main issues banks will have to face to comply with the new Basel II internal ratings-based approach is to prove that the long-run average probabilities of default they assign to their clients, which will be used as the basis for regulatory…
Observations on the differences between operational risk regulatory and economic capital
In this article, Niklas Hageback takes a practical look at the difficulties in reconciling regulatory and economic capital calculation in the discipline of operational risk.
PD estimates for Basel II
One of the main issues banks will have to face to comply with the new Basel II internal ratings-based approach is to prove that the long-run average probabilities of default they assign to their clients, which will be used as the basis for regulatory…
Quant of the year - Michael Gordy, US Federal Reserve Bank
Credit risk specialist who is highly influential with academics and practitioners alike.
Capital calculations
The latest Committee of Chief Risk Officers white paper offers capital adequacy guidelines for energy merchants. But why should energy firms perform these calculations? Glyn Holton asks whether the CCRO has missed the point
Sponsor's article > Credit risk catches up
When Basel II was first proposed in 1999, credit risk models lagged way behind market risk models. But that's changed, which means we need less prescriptive rules for determining credit risk capital.
Despite concerns, banks act on Basel II
Jörg Behrens and Peter Davis of the Ernst & Young Global Financial Services Risk Management Practice, present the results of a global survey of financial services managers'opinions about the future of the Basel II process and its effects on their…
A capital adequacy primer
A summary of the Committee of Chief Risk Officers’ (CCRO) emerging guidelines on capital adequacy, by Cinergy’s Antonio Ligeralde, Kenneth Robinson of El Paso Merchant Energy and CCRO head Michael Smith
Economic capital versus regulatory capital – a market benchmark
Guido Giese sets out to provide a market benchmark for the relationship between economic andregulatory capital models currently used or developed across different financial institutions, andto analyse the market forces driving the development of economic…
Japan's four major banks post losses of $31bn for 2002
Japan's four largest banks have posted a combined ¥3.61 trillion ($30.9 billion) in losses for the 2002 financial year, following larger-than-expected losses in their cross-equity holdings amid slump in the country’s equity markets and their ongoing…
Sponsor's article > Is 8% for all seasons?
Considering the potential pro-cyclical impact of Basel II and the limited effectiveness of countervailing influences, David Rowe concludes that making the 8% ratio of capital-to-risk-adjusted-assets a discretionary policy variable should be part of the…
US FDIC produces second Basel analysis paper
The US's Federal Deposit Insurance Corporation has published its second study of the Basel Accord revisions, titled Risk-based capital requirements for commercial lending: the impact of Basel II .
Random tranches
How should economic or regulatory capital be allocated to tranches of securitisations? The standard Basel conditional dependence calculations are complicated in this case by non-linearity effects and complex deal dependence. Here, Michael Gordy and David…
Random tranches
How should economic or regulatory capital be allocated to tranches of securitisations? The standard Basel conditional dependence calculations are complicated in this case by non-linearity effects and complex deal dependence. Here, Michael Gordy and David…
EU Parliamentary hearings raise a variety of issues
The Committee on Economic and Monetary Affairs of the European Parliament held a public hearing on Tuesday, Febaruary 19, titled "Minimum Capital Requirements for Banks and Investment Firms (Basel II)".
Sponsor's article > Don't count on buffers
One possible mitigator of the pro-cyclical impact of risk-sensitive capital requirements would be counter-cyclical changes in capital buffers. Empirical evidence on this issue is scarce and a new regulatory capital regime could well induce a behavioural…
McDonough paints brave new world of bank regulation
Echoing remarks made earlier in the week, William McDonough, president of the New York Federal Reserve Bank, stressed that the results of the third Quantitative Impact Statement (QIS3) being compiled at the moment show that few changes will have to be…