Thursday, 5 May 2016

#BANKING DARE YOU BASEL #BCSB RABBIT

"UK: Is Basel Driving Banks Down A One-Way Street?
Last Updated: 4 May 2016
Article by David Strachan and Rod Hardcastle
Deloitte
In recent papers1, the Basel Committee (BCBS) has proposed a number of changes to the scope and use of internal modelled approaches.  Taken together, they represent a tectonic shift in banks' ability to use internal models for regulatory capital purposes:
In recent papers1, the Basel Committee (BCBS) has proposed a number of changes to the scope and use of internal modelled approaches.  Taken together, they represent a tectonic shift in banks' ability to use internal models for regulatory capital purposes:



The good news is that for most retail portfolios – where there is sufficient data to evidence empirically accurate and predictive models – the BCBS has kept open the option to use internal ratings based (IRB) approaches for Pillar 1.  This does potentially enable some banks to use IRB models only for portfolios where there is a regulatory capital benefit, albeit that benefit could be reduced as a result of the floors that the BCBS has said it will unveil later this year.

The BCBS's justification for these changes is that banks have not demonstrated that they are capable of modelling risk in these portfolios in a consistent, statistically robust way."

Continues.

Sources

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