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Banks Face Basel Limits on Risk Models for Capital Rules 

December 22, 2014
JIm Brunsden, Bloomberg

Global banks face limits on how far they can reduce their capital requirements using internal models as regulators assert control over how lenders measure risk.

The Basel Committee on Banking Supervision, an international group of standard setters, published draft plans to set a capital floor and to reinforce standard, regulator-set methods to measure possible losses. Supervisors say the move is necessary to counter the threat of banks manipulating internal models to reduce their capital requirements to unsafe levels.

The floor will counter “measurement error” by banks, the Basel group said today in a statement on its website. “It would enhance the comparability of capital outcomes across banks and also ensure that the level of capital across the banking system does not fall below a certain level.”

Read more: Bloomberg

 
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