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Home Archive for category "Trading Book"
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Overview of Basel Committee’s Pillar 3 Disclosure Proposal

The Basel Committee has published a proposal to significantly revise the Pillar 3 capital disclosure standards for internationally active banks.  By way of background, Pillar 3 of the Basel framework aims to promote market discipline through qualitative and quantitative regulatory disclosure requirements.

The main objectives of today’s proposed changes include further enhancing the comparability and consistency of disclosures (both across time and across banks) and providing greater transparency of banks’ internal capital calculation models and methodologies.

Overall themes.  The new disclosure requirements embody, among others, the following overall themes:

  • Longer and more detailed disclosures. 
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Summary of Basel Committee’s Final Large Exposures Framework

Following is a summary of the Basel Committee’s final framework for measuring, reporting and limiting a bank’s exposures to single counterparties and groups of connected counterparties. The large exposures framework, which relies on a number of concepts in the Basel Committee’s risk-based capital framework, is intended to ensure greater international consistency in regulatory and supervisory approaches to large exposures and to act as a backstop to risk-based capital requirements.

Blackline Showing Changes: Davis Polk’s blackline of the Basel Committee’s April 2014 final vs.…  Read More

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Federal Reserve Makes Technical Revisions to Market Risk Capital Rule and U.S. Basel III

Today, the Federal Reserve issued a final rule that makes technical changes to the market risk capital rule to align it with the U.S. Basel III capital framework adopted by the Federal Reserve earlier this year.

The market risk capital rule is used by banking organizations with significant trading activities to calculate regulatory capital requirements for market risk.  The technical changes to the rule reflect modifications by the Organization for Economic Cooperation and Development regarding country risk classifications.  The revisions also clarify the criteria for determining whether underlying assets are delinquent for certain securitization positions in the trading book.  …  Read More

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Basel Committee Issues Second Proposal on Fundamental Review of the Trading Book Capital Rules

Today, the Basel Committee issued a second proposal on the fundamental review of capital requirements for the trading book.

The first proposal, issued in May 2012, described a number of specific measures to improve trading book capital requirements.  The second proposal provides more detail on the approaches introduced in May 2012, and sets out a draft text for a revised market risk capital framework.

The key features of the proposed revised framework include:

  • A revised boundary between the trading book and banking book.
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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.  …  Read More

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