‘Restructuring’ partly dumped as Basel shifts stance on risk mitigation
The Basel Committee on Banking Supervision, the architect of new banking regulation, Basel II, which is due for implementation by the end of 2006, has made a number of concessions in its proposed treatment of risk mitigation techniques in the release of its third consultative paper, CP3, today.
“During the CP3 consultative period, the Committee also intends to explore alternative regulatory capital treatments for credit derivatives that do not include restructuring as a credit event trigger,” the Committee said in a statement.
The Committee added that it would allow banks using the advanced measurement approaches to operational risk to use insurance as an operational risk mitigant when calculating regulatory capital. But this must not exceed 20% of a bank’s total operational risk capital requirement, the Committee said.
But there was less progress in the area of securitisation following industry objections to the Basel Committee’s second working paper on securitisation issued in October last year. “The Committee reaffirms the need for banks to deduct from capital positions that are highly subordinated,” said the Committee. “The Committee views this requirement as necessary in order to create strong incentives for banks not to retain or to assume the risk associated with these positions that inherently contain the greatest risk.”
The earlier-than-expected release of CP3 – albeit already delayed from the Committee’s original timetable – provides bankers with more time to review the 216- page revised Basel II Accord.
The banking industry will have three months to issue comments related to CP3, with all submissions to national supervisors, central banks or the Bank for International Settlements due no later than by July 31. The Committee will then review these comments and plans to issue the final Accord in the fourth-quarter of this year.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
FRTB start dates must align globally, says European Commission
Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Basel III endgame: why moving fast might prove better for banks
Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching
Isda pushes to ‘decouple’ Simm calibration from model changes
Emir 3.0 prompts effort to separate risk-weight revisions from methodology updates
Basel war on window-dressing may smooth liquidity, at a price
Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Most read
- Breaking out of the cells: banks’ long goodbye to spreadsheets
- Too soon to say good riddance to banks’ public enemy number one
- Industry calls for major rethink of Basel III rules