Preface
The banking regulatory and supervisory authorities are focusing attention on two key issues: implementation of the new capital adequacy framework in banking institutions and transition to a foolproof risk-based bank supervision system. The New Basel Capital Accord of 2006 is more risk sensitive than the Old Capital Accord of 1988. For the first time, a counterparty rating-based approach has been advocated for regulatory capital assessment. Besides, a new concept of economic capital has been introduced to stick to a capital standard that takes care of unusual losses from severe events.
The New Accord encourages banks to develop internal models for risk rating and risk measurement, strengthen their risk management practices and procedures, and acquire internal capability to assess capital requirements. Concurrently, bank supervisory authorities are taking new initiatives in many countries to focus on a risk-based bank supervision system in order to reduce financial sector vulnerability. The supervisors require banks to undertake self-assessment of their risk profile, identify vulnerabilities in their operations, and improve risk management practices to protect their capital base and ensure long-term solvency. This book takes into account New Capital Accord issues, including those specified in the 2010 Basel Committee response to the global financial crisis, and deals with important aspects of risk management in one place.
Commercial banks, financial institutions, bank auditors, ...
