In 1999 the Basel Committee working with the major banks of member countries to develop a new Capital Accord. The aim is to cover all risks into a banking capital adequacy framework is comprehensive.
Development of Basel II coincides with the movement in the countries the EU to balance the financial and banking market → known as the Financial Market Programs.
Basel II, with a few changes will be the basis for the countries to the EU capital adequacy calculations - the Capital Requirements Directive (CRD).
Friday, August 28, 2009
Sunday, August 23, 2009
Weaknesses of Basel I Accord
Basel I and the risk of corporate credit
Along with the success of Market Risk amendment, many bank credit internal change process with a quantitative model similar to the technique because Var:
Var success model by many banks, and
Increased risk of trade credit, because the loan syndication is becoming increasingly complex and sekuritisasi bank loans become more.
Approach of Basel I capital adequacy of the RWA to give the same weight so that the capital needs of the same for all loans, regardless of memperharikan credit grade borrowers.
banks that lend to companies with credit standing is required to have a very good investment with the bank that lend to the company's credit standing with the ugly. This is not a problem for the bank can charge the same to all debtors. However, competition with the bank increased corporate bond market where the margin of credit associated with the bond market credit grading on the bonds issued based on the rating of the institution pemeringkat such as Standard & Poor's and Moody's Investors Service.
The same problem appears to Unsecured personal lending (credit card lending) and a loan to the government (Sovereign loans).
Along with the success of Market Risk amendment, many bank credit internal change process with a quantitative model similar to the technique because Var:
Var success model by many banks, and
Increased risk of trade credit, because the loan syndication is becoming increasingly complex and sekuritisasi bank loans become more.
Approach of Basel I capital adequacy of the RWA to give the same weight so that the capital needs of the same for all loans, regardless of memperharikan credit grade borrowers.
banks that lend to companies with credit standing is required to have a very good investment with the bank that lend to the company's credit standing with the ugly. This is not a problem for the bank can charge the same to all debtors. However, competition with the bank increased corporate bond market where the margin of credit associated with the bond market credit grading on the bonds issued based on the rating of the institution pemeringkat such as Standard & Poor's and Moody's Investors Service.
The same problem appears to Unsecured personal lending (credit card lending) and a loan to the government (Sovereign loans).
Tuesday, August 18, 2009
Risk Based Regulation
Basel I did not know that the capital a bank must be connected with the credit standing of:
- Borrower
- Publisher securities
- Other parties who have financial obligations to the bank (eg a guarantor)
Broadest category of others who use Basel I and sensitivity to the process simple add-on for counterparty credit risk, limit the scope of risk based regulation.
Market Risk Amendment Var model that uses the first element of risk based regulation → an early step in a major development of risk-based regulation.
- Borrower
- Publisher securities
- Other parties who have financial obligations to the bank (eg a guarantor)
Broadest category of others who use Basel I and sensitivity to the process simple add-on for counterparty credit risk, limit the scope of risk based regulation.
Market Risk Amendment Var model that uses the first element of risk based regulation → an early step in a major development of risk-based regulation.
Thursday, August 13, 2009
Value at Risk (VaR)
Quantitative models used by banks and accepted by the Committee referred to the model var. This model shows a maximum value over the estimated losses due to market risk of a bank's portfolio:
During a certain holding period, and
With a certain level of confidence (eg a certain probability)
Add-on techniques (techniques of Basel I for off-market assets) and Var technique is to achieve the same value that indicates a transaction (or portfolio value of all bank transactions, where they occur it is likely to offset each other) during a period (holding period).
Holding period of a transaction known as the Var → Horizon for most of the market transaction is 1 day, so it is often called the Daily Var or DVaR measure.
Reports can be risk of a bank statement containing the following:
'have a portfolio of trade DVaR of USD 5 million on the level
95% '
Meaning DVaR above is:
'in one day trading period there is a 5% likelihood that the portfolio's losses could exceed USD 5 million'
Figures in the Var model does not provide estimates of the actual losses that will occur eg in the example above there is no indication how much of USD 5 million loss will occur because it → Var must be equipped with a stress test.
During a certain holding period, and
With a certain level of confidence (eg a certain probability)
Add-on techniques (techniques of Basel I for off-market assets) and Var technique is to achieve the same value that indicates a transaction (or portfolio value of all bank transactions, where they occur it is likely to offset each other) during a period (holding period).
Holding period of a transaction known as the Var → Horizon for most of the market transaction is 1 day, so it is often called the Daily Var or DVaR measure.
Reports can be risk of a bank statement containing the following:
'have a portfolio of trade DVaR of USD 5 million on the level
95% '
Meaning DVaR above is:
'in one day trading period there is a 5% likelihood that the portfolio's losses could exceed USD 5 million'
Figures in the Var model does not provide estimates of the actual losses that will occur eg in the example above there is no indication how much of USD 5 million loss will occur because it → Var must be equipped with a stress test.
Saturday, August 8, 2009
Market Risk Amendment
Basel I is often criticized because of lack of sensitivity to risk, and sensitivity to risk is the basic idea at the time of the Committee of Basel I.
Sensitivity level of risk increased when the Basel Committee issued a 'the amendment to the Capital Accord to incorporate Market Risks' in January 1996 (known as the "Market Risk amendment")
Market Risk Amendment is the peak of the process when the Committee published a paper entitled 'The Supervisory Treatment of Market Risks' and ask the bank and the market to provide commentary. Then in 1994 Committee to do research on the use of internal models by banks to calculate the market risk.
Internal model of the views of each bank to the risk that you run with a different approach from the RWA Basel I.
Basel Committee and the Market Risk amendment with the 'twin-track approach'. This approach of assessing the accuracy of the pengaplikasian quantitative internal model and the quality of the implementation process.
Sensitivity level of risk increased when the Basel Committee issued a 'the amendment to the Capital Accord to incorporate Market Risks' in January 1996 (known as the "Market Risk amendment")
Market Risk Amendment is the peak of the process when the Committee published a paper entitled 'The Supervisory Treatment of Market Risks' and ask the bank and the market to provide commentary. Then in 1994 Committee to do research on the use of internal models by banks to calculate the market risk.
Internal model of the views of each bank to the risk that you run with a different approach from the RWA Basel I.
Basel Committee and the Market Risk amendment with the 'twin-track approach'. This approach of assessing the accuracy of the pengaplikasian quantitative internal model and the quality of the implementation process.
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