Beyond Basel 2.5: regulators prepare trading book review

The Basel Committee is planning to launch its long-awaited review of trading book capital rules within the next few months. It could redefine the boundaries of the trading book, seek to reflect market liquidity and also overhaul the current patchwork of risk measures, but banks are being warned not to expect too much. Mark Pengelly reports

Charles Taylor

As new trading book capital charges have piled up in the past three years – increasing from a single value-at-risk methodology to seven separate elements – so have the industry’s complaints. Banks see the regime as clunky and too conservative, arguing it double-counts risks and fails to recognise hedges. Consequently, risk managers have been looking forward to a fundamental review of trading book rules, originally scheduled for completion by the end of 2011. Having missed this self-imposed

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