Procyclicality
Can CCPs zone in on improved margin buffers?
Dynamically adjusting margin add-ons could reduce cyclical funding demands
Never mind the buffers: Covid reveals deeper flaws in Basel III
Tweaking discretionary capital buffers won’t address all the prudential issues raised in 2020
Regulators’ margin model rules too lax – BlackRock exec
Risk USA: EU anti-procyclicality rules like “putting a curtain over a draughty window”
Jerome Kemp on the skewed economics of clearing
Only Fed intervention prevented “a really big market disaster” during Covid, says derivatives veteran
Rewards for failure: the ECB’s topsy-turvy market risk relief
Eurozone banks with better models are least able to offset Covid-driven rise in backtesting multiplier
CCPs failing to set effective margin limits – study
Clearers must strike balance between countercyclicality and sensitivity to risk
Procyclicality mitigation for initial margin models with asymmetric volatility
In this paper, we explore the procyclicality of initial margin requirements based on VaR volatility models.We suggest procyclicality can be reduced using a three-regime model rather than using ad hoc tools.
FRTB comes too late for Covid crisis
Expected shortfall would stop Basel 2.5 duplicate capital charges, but backtesting still a problem
Eurozone banks fear market risk capital hike due to Covid-19
Hopes that ECB will fix double-counting as VAR breaches rise on market volatility
Current expected credit loss procyclicality: it depends on the model
This work looks at a wide range of models to test the degree to which CECL is procyclical for different types of model.
CECL models may leave banks ill-prepared for next downturn
Mortgage backtest study shows some loan-loss models miss the mark
Fixing the roof while the sun – wait, is that rain?
The Fed is split on whether to apply a countercyclical buffer. But so is everyone else
CCP margin buffers too big, research suggests
Procyclicality calculations should depend on expected spikes in volatility, argue Ice risk experts
Central counterparty anti-procyclicality tools: a closer assessment
This paper investigates whether the substantial focus placed on the procyclicality of initial margin reflects both the original concerns at the time of the 2007-8 financial crisis and the intrinsic 'modus operandi' of CCPs.
Q&A: ‘Stop talking about rules’ – Basel’s Coen
Standard-setter’s top staffer is moving on. He wants industry to do the same
Eurozone insurers’ bets on alternatives raises systemic risk
Dutch firms have more than 25% of total assets tied up in non-traditional investments
Luxembourg is latest EU state to hike countercyclical buffer
In total, EU states hiked CCyB rates 13 times last year, up from six in 2017
EU countries accelerate countercyclical buffer increases
Eleven EU members currently apply CCyBs, with Bulgaria the most recent country to join the club
CECL fans and foes cross swords on Capitol Hill
Dispute over economic impact rages on despite agreement on capital relief
Lower margin can fuel procyclicality in CCPs – research
Efforts to prevent ‘margin spiral’ during stress could encourage more risk-taking, paper argues
Denmark, Sweden hike countercyclical buffers
Swedish banks now subject to highest add-ons among European Union lenders
Procyclicality of capital and portfolio segmentation in the advanced internal ratings-based framework: an application to mortgage portfolios
This paper investigates the procyclicality of capital in the advanced internal ratings based (A-IRB) Basel approach for retail portfolios, and identifies the fundamental assumptions required for stable A-IRB risk weights over the economic cycle.
Lehman’s ghost: how three CCPs anchor models to crash
The Lehman crash still haunts the margin models of LCH, CME and Eurex, albeit in different ways
Crédit Agricole and Groupe BPCE hardest hit by countercyclical buffer
Minimum capital requirement will rise around 20 basis points at BPCE; 16 at Crédit Agricole