Loss given default (LGD)
Does CP3 get it right?
The Basel Committee on Banking Supervision's third consultative paper raises several complex issues, not least of which is: will it work in practice?
Accord preparations: the rest is yet to come
While the debates have raged for months about many aspects of the proposed Basel II Accord, on some points there has been relative silence, in particular with regard to the seeming overreliance on statistical techniques.
Basel Committee publishes additional QIS3 results
The Basel Committee on Banking Supervision has published additional statistical data from the third quantitative impact study (QIS3), which was originally released on May 5.
QIS3 results released by Basel Committee
A paper outlining the results of the third quantitative impact study (QIS3) was released by the Basel Committee on Banking Supervision yesterday.
Taking it slow
Hong Kong's banks are, for the most part, targeting the standardised approach outlined in the new Basel capital Accord, but it is hoped that this will act as a catalyst for the further improvements in risk management.
Landesbanken to offer credit loss database to third parties
Three of Germany's largest Landesbanken and the consultancy BearingPoint are planning to bring a credit loss database (CLD) that they are developing jointly to the market in the second half of this year. The tool is being designed to comply with the new…
Book extract > Regulatory Use of Credit Ratings: Implications for Banks, Supervisors and Markets
Barbara C. Matthews is Banking Advisor and Regulatory Counsel to the Institute of International Finance, Inc. (IIF). The views presented in this chapter, however, are her personal views and do not necessarily represent the views of the IIF or its members…
Sponsor's article > No cure through the cycle
Some have argued that the antidote for pro-cyclicality in the Basel II capital requirements is the use of 'through-the-cycle' estimates of default and recovery rates. David Rowe argues that, whilethis might mitigate the pro-cyclical impact of the Accord,…
Sponsor's article > The role of correlation
David Rowe surveys recent research on the role of correlation between probability of default and recovery rates, as well as among default probabilities.
Data hurdles
The risk management rumour mill has been buzzing in recent weeks with the story that US banking regulators have told the senior management of the country’s 30 largest banks that they will be expected to implement the advanced internal ratings-based (IRB)…
Sponsor's article > Basel II and pro-cyclicality
The main argument for making regulatory capital requirements more risk-sensitive is to improve allocational efficiency. But this may lead to intensified business cycles if regulators fail to take measures to prevent such an impact.
Correlation and credit risk
Active development of full credit portfolio modelling continues apace, even though it is not recognised in the proposed Basel II framework.
Basel II could reinforce economic cycles more than expected, says BIS study
BASEL – The Basel II bank capital accord could reinforce economic cycles to a greater extent than expected, according to a working paper issued today by the Bank for International Settlements (BIS), the so-called central bankers’ central bank.
Gaining an edge from Basel
The recent recommendations of the Basel Committee are set to usher in a period of upheaval for many participants in the banking sector. Standard & Poor’s Anthony Albert looks at how to gain a competitive advantage in credit risk management in the light…
Banking on progress
A dizzying array of credit risk technology firms have set up shop in Asia in order to reap the rewards of the new Basel recommendations. But are Asia’s regional banks ready to implement these systems?
Basel inflicts collateral damage
The current Basel proposals could lead to the global spread of the type of systemic loan loss problems Japan is now experiencing, argues John Frye of the Federal Reserve Bank of Chicago.
Probing granularity
The granularity adjustment, which adjusts risk weightings for credit portfolio diversification, is one of Basel II’s key modelling assumptions. Here, Tom Wilde uncovers a weakness in this assumption arising from the differences in the underlying credit…
Basel bonds Canada
The largest Canadian banks have banded together to share default data, making it much more likely they will all qualify for the most advantageous regulatory capital approach under the Basel II capital Accord.
Why Basel must brush-up on credit
Paul Kupiec of the International Monetary Fund argues that unresolved calibration problems remain with the new Basel Accord’s credit risk capital requirements – problems that may lead banks to make damaging risk decisions.
Weighting for Risk
Basel has recognised that collateral and seniority give banks an advantage when an obligor defaults. Here, Jon Frye argues that the proposal may encourage banks to lend on the collateral – a practice that could threaten their own survival – and proposes…
Basel's new credit model
The Basel Committee’s new consultative paper allows banks to internally rate individual credits. But at the portfolio level, Basel wants to apply a single model framework, based in part on a technical paper published in Risk magazine in October 1998.
Five reasons why regulators should approve the loss-distribution approach
The Basel Committee shied away from the most risk-sensitive way of calculating an op risk charge, says Michael Haubenstock. He argues for a green light.