Probability of default (PD)

Avoiding pro-cyclicality

David Cosandey and Urs Wolf argue that, for small to medium-sized enterprises, Basel II is pro-cyclical because of a double-counting of the risks. They present two main directions for possible capital rules that would circumvent the pro-cyclicality…

Correlation and credit risk

Active development of full credit portfolio modelling continues apace, even though it is not recognised in the proposed Basel II framework.

A cost/benefit approach to Basel II

The cost of implementing Basel II could put banks at a competitive disadvantage compared with non-banks, and spur them to ‘de-bank’ to avoid this regulatory burden. Harry Stordel and Andrew Cross say regulators must look at the provisions from a cost…

Gaining an edge from Basel

The recent recommendations of the Basel Committee are set to usher in a period of upheaval for many participants in the banking sector. Standard & Poor’s Anthony Albert looks at how to gain a competitive advantage in credit risk management in the light…

A major improvement

In May, David Rowe wrote that the Basel Committee ‘could do better’ with respect to the inclusion of operational risk in the capital Accord. Here, he says the working paper the committee published in late September outlines a major and valuable…

Basel inflicts collateral damage

The current Basel proposals could lead to the global spread of the type of systemic loan loss problems Japan is now experiencing, argues John Frye of the Federal Reserve Bank of Chicago.

Basel acts on private equity losses

The Basel Committee on Banking Supervision has issued a proposal for determining the capital reserves for bank equity exposures. It promises to be as controversial as the other aspects of the Basel II capital Accord.

Probing granularity

The granularity adjustment, which adjusts risk weightings for credit portfolio diversification, is one of Basel II’s key modelling assumptions. Here, Tom Wilde uncovers a weakness in this assumption arising from the differences in the underlying credit…

IRB approach explained

At the end of this month, the consultation period for the new Basel Accord on bank capital will end. We have prepared a technical section this month devoted to various issues surrounding Basel II. In the first paper, Tom Wilde sheds light on the…

Could do better

David Rowe argues that the Basel Committee can provide better incentives for improved operational risk management than those implicit in the draft revision to the capital Accord.

Implications of Basel for credit risk

Credit risk comes under the spotlight in Pillar one of the new Accord, forcing institutions to consider the benefits – and costs – of meeting the regulatory requirements. Jared Chebib, head of credit risk consulting at Andersen’s London office reports.

Basel's new credit model

The Basel Committee’s new consultative paper allows banks to internally rate individual credits. But at the portfolio level, Basel wants to apply a single model framework, based in part on a technical paper published in Risk magazine in October 1998.

Reconcilable differences

H Ugur Koyluoglu and Andrew Hickman explore the common ground between the new credit risk models and the implications for risk management and regulatory capital reform.

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