Basel Regulations

The requirements of Basel II pervaded all aspects of a bank’s organisation, from boardroom culture to rating models to the systems to collect and manage vast volumes of data.

In the wake of the financial crisis the Basel III proposals have emerged which have an equally profound effect on the management of banks as Basel II, with some of the most important areas being:

  • Implementation of new capital ratios and changes to the definitions of eligible capital
  • Changes to RWA calculations
  • Risk coverage – e.g.
    • CVA capital charge
    • Stressed exposure at default (EAD)
    • Wrong Way Risk

We can assist in an entire Basel programme, from initial gap analysis to full programme management, or we can focus on specific areas such as:

  • Credit Risk
    • Rating models
    • Data and systems
    • Measurement of exposure under standardised and Internal Model Method (IMM)
    • Risk coverage changes required under Basel III (CVA capital charge, Wrong Way Risk etc)
  • Market Risk
    • Basel II.5 – e.g. Incremental Risk Charge (IRC), stressed VaR, comprehensive risk measure
    • Trading Book review -  e.g. expected shortfall, calibration to stressed environments, incorporation of market liquidity
  • Operational Risk
    • Standardised and Advanced Measurement Approaches
  • Pillar 2
    • ICAAP
    • Stress testing


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