In this paper we develop a probability of default (PD) model for mortgage loans, taking advantage of the Spanish Credit Register, a comprehensive database on loan characteristics and credit quality. ...From that model, we calculate different types of PDs: point in time, PIT, through the cycle, TTC, average across the cycle and acyclical. Then, we compare capital requirements coming from the different Basel II approaches. We show that minimum regulatory capital under Basel II can be very sensitive to the risk measurement methodology employed. Thus, the procyclicality of regulatory capital requirements under Basel II is an open question, depending on the way internal rating systems are implemented and their output is utilised. We focus on the mortgage portfolio since it is one of the most under researched areas regarding the impact of Basel II and because it is one of the most important banks’ portfolios.
Bu çalışma, artan banka şeffaflığının, bankacılık krizlerinin ortaya çıkma olasılığının nasıl azaltacağını incelemeyi amaçlamaktadır. Ayrıca, çalışmada uygun zamanlı ve doğru bilgiye dayalı artan ...şeffaflığın bankacılık krizlerini azaltacağını ortaya koymaktadır. Türk bankacılık sistemindeki son krizler, mali yapıları önemli ölçüde bozulan bazı bankaların bu durumlarını kamuoyundan gizlediklerini ve Türk ekonomisine olan mali yüklerini sürekli artırdıklarını ortaya koymuştur. Bu çalışma, şeffaflığın belirli koşulların (Basel II, Üçüncü Yapısal Blok) sağlanması halinde bankacılık sisteminin istikrarını iyileştirebileceğini ve bankacılık krizlerini azaltacağını ileri sürmektedir.
Nowadays, the whole world is trying to implement efficiently the Basel II, this moment being foreseen for 2006. In general, the banks consider that the frame established by Basel II, is having a ...positive effect over the increasing of the competitional capacity of the banks meeting the internal goals of the departments for risk’s management. The main problem central and east European banks face is the still quite long way until complete compatibility with the Basel II requires and the lack of funding and expertise. With all these troubles, some of the central and east European banks decided to invest and adopt directly the internal risk based model suggested by the Basel II. For central and East European banks applying the Basel Agreement will represent a test of their integration abilities into a large financial European market and then a global one. The important economic and political changes that happened lately in the central and eastern Europe (CEE) represent a unique base for Basel II implementation. The joint of G10 at the European Union in may 2004, and that of Romania and Bulgaria in 2007, as also the strong economic growth from the last period encouraged international banks to create networks in the area. Plus, the local market has an extraordinary potential :it is still under-banked and the request for financial products has risen spectacularly, especially in 2003, 2004. The retail bank divisions have had high rates of growth and prognosis show that this evolution will continue in the future. The potential of the area it is demonstrated by Romania where the credit consume increased with 300% in 2003 comparing to 2002. Banking infrastructure is also in full development by creating credit office. That is why, a great part of national banking assets are already owned by farreaching regional or international banks. The largest banks from the CEE countries are already owned by international banks and the process will continue with banks privatization from Albany, Bulgaria and Serbia. The UE committee finalized an adjustment proposal of the international banks capital rules to the European needs.
Risk Appetite Girling, Philippa X
Operational Risk Management,
2013, 2013-10-02
Book Chapter
The risk appetite element of the operational risk framework is the glue that holds the framework together, but there is little guidance on it in the original Basel II documents. Regulators have ...recently provided further guidance that makes it clear that the board of directors, senior management and the businesses all have roles to play in setting and managing operational risk appetite. There is a wide range of practice in implementing risk appetite frameworks today.
The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine ...their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by use of this measure. We then discuss other measures, pointing out their strengths and shortcomings. We give detailed examples, showing the need for five risk measures in order to compute a capital in relation to the risk to which the bank is exposed. In the end, we suggest using five different risk measures for computing capital requirements.
The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine ...their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by use of this measure. We then discuss other measures, pointing out their strengths and shortcomings. We give detailed examples, showing the need for five risk measures in order to compute a capital in relation to the risk to which the bank is exposed. In the end, we suggest using five different risk measures for computing capital requirements.
The Basel Committee on Banking Supervision and the EU Commission have submitted – widely harmonised – proposals for reforming the capital requirements for banks and investment firms (Basel II). The ...object of the reform is to strengthen the stability of the financial market by aligning the regulatory capital requirements of banks more closely with underlying risks, especially credit risks, an object that is to be achieved chiefly by the greater use of new risk assessment methods to be applied internally by the banks. Macroeconomic aspects on the regulatory side were, for the time being, almost ignored by both proposals. The resultant consequences that might arise for the overall economy and financial system triggered an intense debate among scientists and politicians which has not yet been settled.
This chapter discusses the role of information technology (IT) department in the daily operations of an investment firm. The IT department of an investment firm has two primary responsibilities: ...managing “business as usual” activities and managing business change. The department needs to manage these activities in such a way that it minimises operational risk. The seven operational risk events defined by Basel II include: internal fraud; external fraud; employment practices and workplace safety; clients, products, and business practice; damage to physical assets; business disruption and systems failures; and execution, delivery, and process management. IT managers need to be aware that major problems of the types described by the Basel Committee are often reported by the trade press, national press, and television, which can lead to reputational risk. As part of IT department's “business as usual” activity, the department will normally need to set up a helpdesk to handle requests for assistance from its users. Change management or change control procedures are processes designed to prevent software or hardware objects from being amended without auditability and review of the impact by all interested parties.
We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank’s probability of success depends on the quality of its risk ...measurement and management systems. Under Basel II capital requirements, this quality is either fully or partially disclosed to market participants by the Pillar 3 disclosures. We show that, under stringent Pillar 3 disclosure requirements, banks’ equilibrium probability of success and total welfare may be higher under a simple Basel II standardized approach than under the more sophisticated internal ratings-based (IRB) approach.
