The Basel II capital adequacy regulation
The minimum amount of capital required by regulators will be calculated as follows:
Minimum capital ≥ 8% × risk-weighted assets (RWA)
This is similar to Basel I. What is new is that the risk-weighted assets will include a revised measure of credit risk. Moreover, they will also include a measure of operational risk. The capital charge for trading risk will be identical to that of Basel I.
The two components of bank capital discussed in Stage 6, Tier 1 and Tier 2, remain unchanged. It is not that central banks were totally satisfied with this complex definition of capital, but rather that they were busy ...
Get Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
