New Basel Treaty and risk control problems in banks | LEGAL FINANCE - BANKING
To standardize the operation of the banking system in the international financial guitar case rack markets, common European banks performed two tools: Single European Act and the Basel Convention. However, in recent times, the crisis occurred in world financial markets, especially the risks arising in the banking sector has led national governments around the world have put into question Title: improved Basel (1988) into a new Basel Convention with the aim of strengthening the risk control measures of the banking system.
New Basel Treaty as documentation describing the proposed rules enhance the management of credit risks, related to the scope of the capital requirement for operational risk, given the reform measures various progress towards treaty "exists" and detailed "inspection activities guitar case rack and supervision" as outlined the pillars of "market discipline". Initially, the Treaty allows a three-year transition period before fully effective. Thus by 2004 the financial institutions in the developed countries join the treaty must comply with it. However, on the implementation guitar case rack of the treaty have stalled. 11/2007, the US side to formally accept the application of Basel 2. And then in 2008, all new EU bank conducted a report on the level of capital adequacy (captial adequacy) as standard guitar case rack The new Basel ink.
The following table shows the validity of this Treaty: Treaty present new treaty Focus on a risk management solution unique concentrate more on internal cabling methods of the banks, evaluation inspection, supervision and discipline on market principles A common rules for all: suggest guitar case rack a selection for all banks. Spirit series, a list of methods, these incentives: the banks have a few options to control large structure (fine) Multiple adjustment of risk than credit risk to risk management better credit.
The new regulations have very broad scope. It provides a broad range of options, the measurement indicators and a more comprehensive complex, besides describing the work being done, with the unresolved issues will be held in the specified logical final. The new treaty includes guitar case rack 3 pillars:
1. Overview of the economic contribution of the new Basel economic contributions of the new Treaty extends the whole process of inspection, supervision and market discipline. On the economic front, new treaty proved to be a big step forward, in particular:
Working quantitative credit risk measurement, the Treaty provides a method to choose between the "standardized", "Basic" and "Advanced". It overcome the limitations of the "Cooke ratio", with a limited number of significant weight and a unique number for every partner 100% risk. No changes to the definitions guitar case rack of capital and Tier 1 capital / level 2 and coefficient of 8%.
A new series of ratios (the ratio McDonough) are taken to remedy this shortcoming. The risk weighted capital ratios determined provisions for credit losses. Banks have relied on weight regulation and penalties are not linked to risk, lead to distortions in the risk assessment, pricing and measurable targets performance adjusted for risk, etc. ... The new treaty provides a framework "risk sensitive" and would generate a large engine guitar case rack solve the "inadequacy" of credit risk data.
It also extends the scope of the capital requirement for operational risk. The measurement of operational risk is still very "sketchy" for a time because of lack of information, but this treaty will stimulate change quickly.
From the economic point of view, this treaty limitations encountered guitar case rack the accuracy of the measurement criteria based on fines, a restriction was reduced slightly by the need to balance between accuracy and practicality .
This Treaty brought and a series of "sensitive options risk" to emphasize to both types of risk. For credit risk, this selection includes standardized method, with simple guitar case rack requirements, and expand the methods based on internal ratings (IRB) "Basic" and "Advanced ". Internal guitar case rack ratings are assessed relative credit risk of the borrower and / or organizations borrowers, because banks regulations. Wants the new treaty does not give a net increase or decrease the net - on average - in minimum charter guitar case rack capital. Under this new Agreement, the denominator of the ratio of total minimum capital will include three components: total assets adjusted for risk to credit risk, plus the total capital ratio of 12.5 times prescribed for market risk and operational risk. Assume that a bank with assets 875 USD risk adjusted capital regulations for market risk capital is US $ 10 and the provisions for operational risk is $ 20, the denominator of the ratio of total capital to with 875 + [(10 + 20) x12.5] or by $ 1,250.
This new distribution pact
To standardize the operation of the banking system in the international financial guitar case rack markets, common European banks performed two tools: Single European Act and the Basel Convention. However, in recent times, the crisis occurred in world financial markets, especially the risks arising in the banking sector has led national governments around the world have put into question Title: improved Basel (1988) into a new Basel Convention with the aim of strengthening the risk control measures of the banking system.
New Basel Treaty as documentation describing the proposed rules enhance the management of credit risks, related to the scope of the capital requirement for operational risk, given the reform measures various progress towards treaty "exists" and detailed "inspection activities guitar case rack and supervision" as outlined the pillars of "market discipline". Initially, the Treaty allows a three-year transition period before fully effective. Thus by 2004 the financial institutions in the developed countries join the treaty must comply with it. However, on the implementation guitar case rack of the treaty have stalled. 11/2007, the US side to formally accept the application of Basel 2. And then in 2008, all new EU bank conducted a report on the level of capital adequacy (captial adequacy) as standard guitar case rack The new Basel ink.
The following table shows the validity of this Treaty: Treaty present new treaty Focus on a risk management solution unique concentrate more on internal cabling methods of the banks, evaluation inspection, supervision and discipline on market principles A common rules for all: suggest guitar case rack a selection for all banks. Spirit series, a list of methods, these incentives: the banks have a few options to control large structure (fine) Multiple adjustment of risk than credit risk to risk management better credit.
The new regulations have very broad scope. It provides a broad range of options, the measurement indicators and a more comprehensive complex, besides describing the work being done, with the unresolved issues will be held in the specified logical final. The new treaty includes guitar case rack 3 pillars:
1. Overview of the economic contribution of the new Basel economic contributions of the new Treaty extends the whole process of inspection, supervision and market discipline. On the economic front, new treaty proved to be a big step forward, in particular:
Working quantitative credit risk measurement, the Treaty provides a method to choose between the "standardized", "Basic" and "Advanced". It overcome the limitations of the "Cooke ratio", with a limited number of significant weight and a unique number for every partner 100% risk. No changes to the definitions guitar case rack of capital and Tier 1 capital / level 2 and coefficient of 8%.
A new series of ratios (the ratio McDonough) are taken to remedy this shortcoming. The risk weighted capital ratios determined provisions for credit losses. Banks have relied on weight regulation and penalties are not linked to risk, lead to distortions in the risk assessment, pricing and measurable targets performance adjusted for risk, etc. ... The new treaty provides a framework "risk sensitive" and would generate a large engine guitar case rack solve the "inadequacy" of credit risk data.
It also extends the scope of the capital requirement for operational risk. The measurement of operational risk is still very "sketchy" for a time because of lack of information, but this treaty will stimulate change quickly.
From the economic point of view, this treaty limitations encountered guitar case rack the accuracy of the measurement criteria based on fines, a restriction was reduced slightly by the need to balance between accuracy and practicality .
This Treaty brought and a series of "sensitive options risk" to emphasize to both types of risk. For credit risk, this selection includes standardized method, with simple guitar case rack requirements, and expand the methods based on internal ratings (IRB) "Basic" and "Advanced ". Internal guitar case rack ratings are assessed relative credit risk of the borrower and / or organizations borrowers, because banks regulations. Wants the new treaty does not give a net increase or decrease the net - on average - in minimum charter guitar case rack capital. Under this new Agreement, the denominator of the ratio of total minimum capital will include three components: total assets adjusted for risk to credit risk, plus the total capital ratio of 12.5 times prescribed for market risk and operational risk. Assume that a bank with assets 875 USD risk adjusted capital regulations for market risk capital is US $ 10 and the provisions for operational risk is $ 20, the denominator of the ratio of total capital to with 875 + [(10 + 20) x12.5] or by $ 1,250.
This new distribution pact
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