Capital Requirements Directive IV Framework Operational Risk Allen & Overy Client Briefing Paper 13 | January 2014
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International Regulation and Treatment of Trade Finance: What Are the Issues?
Staff Working Paper ERSD-2010-09 February 2010 World Trade Organization Economic Research and Statistics Division INTERNATIONAL REGULATION AND TREATMENT OF TRADE FINANCE: WHAT ARE THE ISSUES? Marc Auboin: WTO Manuscript date: February 2010 Disclaimer: This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title. INTERNATIONAL REGULATION AND TREATMENT OF TRADE FINANCE: WHAT ARE THE ISSUES? Marc Auboin 1 Abstract The paper discusses a number of issues related to the treatment of trade credit internationally, a priori (treatment by banking regulators) and a posteriori (treatment by debtors and creditors in the case of default), which are currently of interest to the trade finance community, in particular the traditional providers of trade credit and guarantees, such as banks, export credit agencies, regional development banks, and multilateral agencies. The paper does not deal with the specific issue of regulation of official insured-export credit, under the OECD Arrangement, which is a specific matter left out of this analysis. Traditionally, trade finance has received preferred treatment on the part of national and international regulators, as well as by international financial agencies in the treatment of trade finance claims, on grounds that trade finance was one of the safest, most collateralized, and self- liquidating forms of trade finance. -
Guidance on Operational Risk BIA And
CENTRAL BANK OF NIGERIA Guidance Notes on the Calculation of Capital Requirement for Operational Risk Basic Indicator Approach (BIA) and the Standardized Approach (TSA) TABLE OF CONTENTS OPERATIONAL RISK CAPITAL REQUIREMENT ........................................................................... 3 1.0 INTRODUCTION ........................................................................................................................ 3 1.1 Calculation Approaches ................................................................................................................. 3 1.2 Adoption of Approaches ................................................................................................................. 4 2.0 GOVERNANCE AND MANAGEMENT OF OPERATIONAL RISKS ................................... 4 2.1 Board and Management ................................................................................................................ 4 2.3 Processes and Procedure ............................................................................................................... 4 2.4 Reversion of Approaches ................................................................................................................ 5 2.5 Sound Practices for Operational Risk Management ........................................................... 5 3.0 BASIC INDICATOR APPROACH (BIA) ................................................................................. 5 3.1 Calculation Method ......................................................................................................................... -
Quantifying Operational Risk: Possibilities and Limitations
Quantifying Operational Risk: Possibilities and Limitations Hansj¨org Furrer ETH Z¨urich [email protected]/∼hjfurrer (Based on joint work with Paul Embrechts and Roger Kaufmann) Deutsche Bundesbank Training Centre, Eltville 19-20 March 2004 Managing OpRisk Contents A. The New Accord (Basel II) B. Risk measurement methods for OpRisks C. Advanced Measurement Approaches (AMA) D. Conclusions E. References Managing OpRisk 1 A. The New Accord (Basel II) • 1988: Basel Accord (Basel I): minimum capital requirements against credit risk. One standardised approach • 1996: Amendment to Basel I: market risk. • 1999: First Consultative Paper on the New Accord (Basel II). • 2003: CP3: Third Consultative Paper on the New Basel Capital Accord. (www.bis.org/bcbs/bcbscp3.htmcp3) • mid 2004: Revision of CP3 • end of 2006: full implementation of Basel II ([9]) Managing OpRisk 2 What’s new? • Rationale for the New Accord: More flexibility and risk sensitivity • Structure of the New Accord: Three-pillar framework: Pillar 1: minimal capital requirements (risk measurement) Pillar 2: supervisory review of capital adequacy Pillar 3: public disclosure Managing OpRisk 3 What’s new? (cont’d) • Two options for the measurement of credit risk: Standard approach Internal rating based approach (IRB) • Pillar 1 sets out the minimum capital requirements: total amount of capital ≥ 8% risk-weighted assets • MRC (minimum regulatory capital)def= 8% of risk-weighted assets • New regulatory capital approach for operational risk (the risk of losses resulting from inadequate or failed internal processes, people and systems, or external events) Managing OpRisk 4 What’s new? (cont’d) • Notation: COP: capital charge for operational risk • Target: COP ≈ 12% of MRC • Estimated total losses in the US (2001): $50b • Some examples 1977: Credit Suisse Chiasso-affair 1995: Nick Leeson/Barings Bank, £1.3b 2001: Enron (largest US bankruptcy so far) 2003: Banque Cantonale de Vaudoise, KBV Winterthur Managing OpRisk 5 B. -
Impact of Basel I, Basel II, and Basel III on Letters of Credit and Trade Finance
Impact of Basel I, Basel II, and Basel III on Letters of Credit and Trade Finance Requirement Basel I Basel II Basel III 2013 2015 2019 Common Equity 2.0% of 3.5% of RWA 4.5% of RWA 4.5% of RWA RWA Tier 1 Capital 4.0% of 4.0% of 4.5% of RWA 6.0% of RWA 6.0% of RWA RWA RWA Total Capital 8.0% of 8.0% of 8.0% of RWA 8.0% of RWA 8.0% of RWA RWA RWA Capital Conversion -0- -0- +2.5% of RWA Buffer Leverage Ratio Observation Observation (4% of direct assets) (based on Total Capital) 3% of total direct and contingent assets Counter Cyclical Buffer +Up to 2.5% of RWA Liquidity Coverage Observation 30 days 30 days Net Stable Funding Observation Observation 1 year Additional Loss +1% to 2.5% of RWA Absorbency Color Code Key (US Applicability): (Applies only in the US) In the US, applies only to “Large, Internationally-Active Banks” Not yet implemented in the US Depending on the bank and the point in the economic cycle, under Basel III, the total capital requirement for a bank in 2019 may be as much as 15.5% of Risk-Weighted Assets (“RWA”), compared with 8% under Basel I and Basel II. The amount of Risk-Weighted Assets (“RWA”) is computed by multiplying the amount of each asset and contingent asset by a risk weighting and a Credit Conversion Factor (“CCF”) Under Basel I, risk weightings are set: 0% for sovereign obligors, 20% for banks where tenors ≤ one year, 50% for municipalities and residential mortgages, 100% for all corporate obligors Under Basel II, risk weightings are based on internal or external (rating agency) risk ratings with no special distinction for banks; capital requirements for exposures to banks are increased by as much as 650% (from 20% to as much as 150%) The Credit Conversion Factor for Letters of Credit varies under Basel I vs. -
Basel Area Brochure
Basel economic area Optimal conditions for business success Dear Reader The Basel economic area is home to Europe’s largest life sci- ences cluster. Successful pharmaceutical, biotech and agrochem- ical companies provide for the highest hourly productivity in the industry worldwide. Global companies such as Roche, Novartis and Syngenta, as well as many up-and-coming companies, for example Actelion, have their headquarters here. But Basel’s success is not only based on the life sciences. Studies by UBS and Credit Suisse show that the region today is optimally diversified in growth industries. These include the watch industry, medical engineering and logistics. The greatest strength of the Basel economic area lies in its geo- graphic concentration of skills in universities and companies. Moti- vated and highly qualified people working in research, develop- ment and applications are providing for the strongest economic growth in Switzerland. People feel at home in the Basel area. The population, around 30 percent of whom are foreigners, enjoys a cultural diversity and quality of life that are without parallel. Entrepreneurs appreciate the political stability, the legal certainty and an infrastructure that offers them a predictably ideal environment. Basel is one of the best business regions in the world. We would be happy to provide you with support in your efforts to settle in this first-class location. Dr. Franz Saladin CEO BaselArea 1 Open to the world. Basel is one of the world’s economic hotbeds. Companies based here benefit from a location that combines cosmopolitan living and an international environment with excellent operating conditions and a high quality of life. -
Canton of Basel-Stadt
Canton of Basel-Stadt Welcome. VARIED CITY OF THE ARTS Basel’s innumerable historical buildings form a picturesque setting for its vibrant cultural scene, which is surprisingly rich for THRIVING BUSINESS LOCATION CENTRE OF EUROPE, TRINATIONAL such a small canton: around 40 museums, AND COSMOPOLITAN some of them world-renowned, such as the Basel is Switzerland’s most dynamic busi- Fondation Beyeler and the Kunstmuseum ness centre. The city built its success on There is a point in Basel, in the Swiss Rhine Basel, the Theater Basel, where opera, the global achievements of its pharmaceut- Ports, where the borders of Switzerland, drama and ballet are performed, as well as ical and chemical companies. Roche, No- France and Germany meet. Basel works 25 smaller theatres, a musical stage, and vartis, Syngenta, Lonza Group, Clariant and closely together with its neighbours Ger- countless galleries and cinemas. The city others have raised Basel’s profile around many and France in the fields of educa- ranks with the European elite in the field of the world. Thanks to the extensive logis- tion, culture, transport and the environment. fine arts, and hosts the world’s leading con- tics know-how that has been established Residents of Basel enjoy the superb recre- temporary art fair, Art Basel. In addition to over the centuries, a number of leading in- ational opportunities in French Alsace as its prominent classical orchestras and over ternational logistics service providers are well as in Germany’s Black Forest. And the 1000 concerts per year, numerous high- also based here. Basel is a successful ex- trinational EuroAirport Basel-Mulhouse- profile events make Basel a veritable city hibition and congress city, profiting from an Freiburg is a key transport hub, linking the of the arts. -
From Basel I to Basel II to Basel III Pushpkant Shakdwipee, Masuma Mehta
International Journal of New Technology and Research (IJNTR) ISSN:2454-4116, Volume-3, Issue-1, January 2017 Pages 66-70 From Basel I to Basel II to Basel III Pushpkant Shakdwipee, Masuma Mehta redeposit, and to discourage such a reduction in the first Abstract— The financial system of a country is of immense place". In her article “Why the Banking System Should Be use and plays a vital role in shaping the economic development Regulated", Dow reasons, that regulation is warranted for a nation. It consists of financial intermediaries and financial markets which channels funds from those who have savings to because the moneyness of bank liabilities is a public good". those who have more productive use for them, in a way leading The state in turn produces moneyness by inspiring confidence to money creation. The volume and growth of the capital in the in moneys capacity to retain value (Dow, 1996). economy solely depends on the efficiency and intensity of the operations and activities carried out in the financial markets. Following this line of argument, (Dowd, 1996) derives the One of the most important functions of the financial system is to necessity to regulate banks from the role they play in financial share risk which is catered mainly by the banking sector. intermediation, providing liquidity, monitoring and (Cortez, 2011) Banks are betting that the individuals and information services. Such importance may increase the companies to whom they lend capital will earn enough money to pay back their loans. This process leads to generation of Risk probability of a systemic crisis and lead to substantial social and in turn necessitates Regulations. -
Draft Guidance Notes on Operational Risk Calculation.Pdf
CENTRAL BANK OF NIGERIA GUIDANCE NOTES ON THE CALCULATION OF CAPITAL REQUIREMENT FOR OPERATIONAL RISK FOR NON-INTEREST FINANCIAL INSTITUTIONS IN NIGERIA BASIC INDICATOR APPROACH AND THE STANDARDIZED APPROACH AUGUST, 2018 TABLE OF CONTENTS Definition of terms ............................................................................................................... 3 1.0 Operational Risk Capital Requirement ....................................................................... 4 1.1 Introduction ............................................................................................................ 4 1.2 Calculation Approaches ......................................................................................... 4 1.3 Adoption of Approaches ......................................................................................... 4 2.0 GOVERNANCE AND MANAGEMENT OF OPERATIONAL RISKS .................... 4 2.1 Board, Management and Advisory Committee of Experts (ACE)........................ 4 2.2 Processes and Procedures ....................................................................................... 5 2.3 Reversion of Approaches ........................................................................................ 5 2.4 Sound Practices for Operational Risk Management ............................................. 5 3.0 BASIC INDICATOR APPROACH (BIA) ................................................................... 5 3.1 Calculation Method ............................................................................................... -
Basel Ii/Iii Implementation Roadmap for the Eastern Caribbean Currency Union
BASEL II/III IMPLEMENTATION ROADMAP FOR THE EASTERN CARIBBEAN CURRENCY UNION Bank Supervision Department EASTERN CARIBBEAN CENTRAL BANK ST KITTS BASEL II/III IMPLEMENTATION ROADMAP FOR THE EASTERN CARIBBEAN CURRENCY UNION 1.0 PURPOSE This Roadmap provides an overview of the Eastern Caribbean Central Bank’s (ECCB/the Central Bank) Basel II/III implementation programme for the Eastern Caribbean Currency Union (ECCU). The document outlines the Central Bank’s approach towards implementation, the implementation options selected and key deliverables/activities. The Roadmap is intended to guide the expectations and actions of all stakeholders associated with the Basel II/III implementation process. 2.0 INTRODUCTION The ECCB is committed to implementing certain aspects of Basel II/III in the ECCU for computing the capital adequacy of institutions licenced under the Banking Act 2015 (the Act), in accordance with Sections 46 and 47 of the Act1. Towards this end, the ECCB established a dedicated team (Basel Implementation Group) for spearheading the implementation effort and a Basel II/III Working Committee comprising of representatives from the ECCB, ECCU Bankers Association and commercial banks, for collaborating with the banking industry on an ongoing basis. The Central Bank sought comments on some draft standards2 in 2018 and plans to continue to deepen its interaction with licensees via a number of consultations and training sessions. Basel II/III constitutes a more comprehensive measure of capital adequacy than the existing Basel I. Basel II/III seeks to align regulatory capital requirements more closely with the underlying risks that banks face. The framework requires banks to assess the riskiness of their assets with respect to credit, market and operational risks and seeks to ensure that banks’ minimum capital requirements better reflect inherent risks in their portfolios, risk management practices and accompanying disclosures to the public. -
(RCAP) Assessment of Basel III Regulations –
Basel Committee on Banking Supervision Regulatory Consistency Assessment Programme (RCAP) Assessment of Basel III regulations – United States of America December 2014 This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2014. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9197-012-4 (print) ISBN 978-92-9197-011-7 (online) Contents Glossary ................................................................................................................................................................................................ 1 Preface ................................................................................................................................................................................................ 3 Executive summary ........................................................................................................................................................................... 5 Response from United States ....................................................................................................................................................... 7 1 Context, scope and main assessment findings ................................................................................................... 8 1.1 Context ............................................................................................................................................................................... -
Regulatory Capital and Risk Management Pillar 3 Disclosures
2021 HSBC Bank Canada Regulatory Capital & Risk Management Pillar 3 Supplementary Disclosures As at March 31, 2021 HSBC Bank Canada Pillar 3 Supplementary Disclosure First Quarter 2021 1 Contents Page Notes to users 3 Road map to Pillar 3 disclosures 4 Capital and RWA 5 Regulatory Capital Disclosure - CC1 5 Overview of Risk Weighted Assets (RWA) - OV1 6 Credit Risk 6 RWA flow statements of credit risk exposures under IRB - CR8 6 Market Risk 6 RWA flow statements of market risk exposures under an Internal Model Approach (IMA) - MR2 7 Leverage Ratio 7 Summary comparison of accounting assets vs. leverage ratio exposure measure (LR1) 7 Leverage Ratio Common Disclosure (LR2) 8 Glossary 9 2 HSBC Bank Canada Pillar 3 Supplementary Disclosure First Quarter 2021 Notes to users Regulatory Capital and Risk Management Pillar 3 Disclosures The Office of the Superintendent of Financial Institutions (“OSFI”) supervises HSBC Bank Canada (the “Bank”) on a consolidated basis. OSFI has approved the Bank’s application to apply the Advanced Internal Ratings Based (“AIRB”) approach to credit risk on our portfolio and the Standardized Approach for measuring Operational Risk. Please refer to the Annual Report and Accounts 2020 for further information on the Bank’s risk and capital management framework. Further information regarding HSBC Group Risk Management Processes can be found in HSBC Holdings plc Capital and Risk Management Pillar 3 Disclosures available on HSBC Group’s investor relations web site. The Pillar 3 Supplemental Disclosures are additional summary -
Impacts and Implementation of the Basel Accords: Contrasting Argentina, Brazil, and Chile Kristina Bergess Claremont Mckenna College
Claremont Colleges Scholarship @ Claremont CMC Senior Theses CMC Student Scholarship 2012 Impacts and Implementation of the Basel Accords: Contrasting Argentina, Brazil, and Chile Kristina Bergess Claremont McKenna College Recommended Citation Bergess, Kristina, "Impacts and Implementation of the Basel Accords: Contrasting Argentina, Brazil, and Chile" (2012). CMC Senior Theses. Paper 310. http://scholarship.claremont.edu/cmc_theses/310 This Open Access Senior Thesis is brought to you by Scholarship@Claremont. It has been accepted for inclusion in this collection by an authorized administrator. For more information, please contact [email protected]. CLAREMONT McKENNA COLLEGE IMPACTS AND IMPLEMENTATION OF THE BASEL ACCORDS: CONTRASTING ARGENTINA, BRAZIL, AND CHILE SUBMITTED TO PROFESSOR WILLIAM ASCHER AND DEAN GREGORY HESS BY KRISTINA BERGESS FOR SENIOR THESIS YEAR 2012 APRIL 23, 2012 Acknowledgments To Professor Bill Ascher: Thank you for four years of guidance, good laughs, patience, and enlightenment. You have challenged me, and I am graduating a little bit smarter because of you. To my father: There will never be enough words. Let me just thank you for all those supportive late-night calls, from New York (where it was very early in the morning) to California, to make sure I had not fallen asleep at the computer and that I was still working hard. Now that my thesis is complete, hopefully we can both get a good night’s sleep. To Rosabella Magat: You were there to inspire me and to patiently answer all of my questions. You were there all those late nights to help keep me awake, or to unwind from my thesis challenges.