The long-term effect of Covid-19 on market risk capital

Covid-19 has replaced the global financial crisis in some banks’ stressed VAR calculations

The feral markets that accompanied the start of the coronavirus pandemic may be a thing of the past, but they continue to affect banks’ capital charges – and will do so for some time to come.  

Trading book capital requirements are set using a series of risk indicators, one of which is stressed value-at-risk (SVAR). A bank measures this by calculating how much its current portfolio would fall in value if subjected to a 12-month period of historic stress.

Most banks anchor this stress period to