Basel 3’s capital requirements for market risk

Basel_-_Bank_für_internationalen_Zahlungsausgleich1The Basel Committee on Banking Supervision has issued the revised minimum capital requirements for market risk, a major component of the Basel 3 capital standards.

“The key features of the revised framework include:

– A revised boundary between the trading book and banking book;

– A revised internal models approach for market risk;

– A revised standardised approach for market risk;

– A shift from value-at-risk to an expected shortfall measure of risk under stress; and

– Incorporation of the risk of market illiquidity.”

Read the full text at http://goo.gl/SJBhPz

Basel 3’s new market risk framework and leverage ratio requirements endorsed

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The Basel Committee’s governing body has endorsed Basel 3’s new market risk framework and leverage ratio requirements.

“Notable improvements in the new risk framework, which takes effect in 2019, include:

– A revised boundary between the banking and trading books that will reduce scope for arbitrage;

– A revised internal models approach with more coherent and comprehensive risk capture;

– An enhanced model approval process and more prudent recognition of hedging and portfolio diversification; and

– A revised standardised approach that serves as a credible fall-back and floor to the model-based approach, and facilitates more consistent and comparable reporting of market risk across banks and jurisdictions.

(…)

The [Group of Central Bank Governors and Heads of Supervision (GHOS)] also discussed the final design and calibration of the leverage ratio. Members agreed that the leverage ratio should be based on a Tier 1 definition of capital and should comprise a minimum level of 3%, and they discussed additional requirements for global systemically important banks.”

Read the full press release here.