Basel II Implementation, Chapter 4 - Pillar II, Challenges, and Dealing with Procyclicality
This is a sample chapter from Basel II Implementation, an invaluable guide that puts a potent combination of theory and real-world practice at your fingertips. Written by two of the most globally recognized and sought-after thought leaders in Basel II implementation, this how-to book maps out, step-by-step, implementable solutions that are both academically credible and practical, making them defendable to regulators and executable within the constraints of data, resources, and time.
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acyclical adequacy assessment framework allocated capital Allocating Available Capital bank’s Basel Basel II billion business cycles capital adequacy assessment capital adequacy framework capital allocation capital and managing capital buffer capital estimation capital management Capital reflecting capital requirement confidence level constant solvency ratio correlations current risk taking cyclical businesses discussed downgrade risk downturns EADs economic capital effect Equation 4.2 financial institution gap is allocated governance framework incorporating increase institutions will need less cyclical lines of business LOBA LOBB LOBs managing the safety one-year default probability Pillar II Capital Pillar II implementation PIT capital PIT PDs PIT risk capital procyclicality rating agencies regulators regulatory capital risk appetite Risk quantification risk rating safety buffer scenario analysis shareholders smoothing stress capital limit stress events stress testing stress testing/scenario analysis stressed parameters target rating term risk testing and scenario TTC capital TTC parameters unexpected losses validation and governance view of risk views of capital