In the previous post we reviewed the credit risk requirements under the internal ratings based (IRB) and advanced measurement approaches (AMA). In this post we focus on the various methods to recognize financial collateral in counterparty credit risk calculations. Eligible collateral is used to mitigate
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Applicability & minimum qualifying criteria Applicability criteria The IRB and advanced measurement approaches are applicable to the following financial institutions: Minimum qualifying criteria To be able to use these approaches institutions must meet the following minimum qualifying criteria on an on-going basis. The minimum qualifying
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The Federal Reserve published revised capital adequacy rules and regulations in July 2013 that follow the Basel III revisions to capital adequacy rules. In particular there are revised minimum capital & leverage ratios, a capital conservation buffer and more stringent criteria for instruments eligible for
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The Comprehensive Capital Analysis and Review (CCAR) process is a US Federal Reserve supervisory program for large active banking holding companies (>=$50 billion in total consolidated assets) domiciled in the US. The CCAR exercise, which began in 2011 and carried out once every year, is
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Basel III Credit Risk – Standardized Approach. The Basel III standard issued by BIS has been up for discussion and debate. BIS issued a first consultative paper on the revisions to the standardized approach to credit risk in December 2014. A second consultative paper was
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Unexpected Loss, Expected Loss & Economic Capital. A follow up post on our Economic Capital series where we looked at an alternate approach for calculating Economic Capital using accounting data rather than the BIS guidelines. Within that discussion it was felt that we needed a
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Basel II, Basel III & the Financial Crisis – Bull by the Horns – a review. Bull by the Horns: Fighting to save Main Street from Wall Street and Wall Street from itself by Sheila Bair, chronicles her tenure as FDIC Chairman from 2006 to 2011 during the Great Recession. It is a gripping read as […]