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Home Basel Committee Basel Committee Publishes Report on the Regulatory Consistency of Risk-Weighted Assets for Market Risk

Basel Committee Publishes Report on the Regulatory Consistency of Risk-Weighted Assets for Market Risk

Today, the Basel Committee published a report on the regulatory consistency of risk-weighted assets (RWAs) for market risk.  This analysis of market risk RWAs is part of the Basel Committee’s wider Regulatory Consistency Assessment Programme (RCAP).  A similar analysis is currently under way for credit risk RWAs.

The market risk RWAs report brings together two pieces of analysis: (1) an examination of publicly available data for a selection of large banks and (2) the results of a hypothetical test portfolio exercise, in which 15 internationally active banks participated.  The Basel Committee plans to conduct a further hypothetical test portfolio exercise later this year.

Potential Policy Options:  According to the Basel Committee, the preliminary analysis in the report highlights three potential types of policy options that could be considered in the future:

  1. Improving public disclosure and regulatory data collection to aid the understanding of market risk RWAs;
  2. Narrowing the modeling choices for banks; and
  3. Further harmonization of supervisory practices with regard to model approvals to reduce the level of variation in market risk RWAs.

Materials: 

Basel Committee, Regulatory Consistency Assessment Programme (RCAP) – Analysis of Risk-Weighted Assets for Market Risk (Jan. 2013) available here:  http://www.bis.org/publ/bcbs240.pdf

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