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PHILIPPE CARREL. BASLE 3 (Over Basle2). RISK INTELLIGENCE FOR GOVERNANCE & COMPLIANCE. BASLE 3 (Over Basle 2). Quality and consistency of capital base T1 Equity from 2.5% to 4.5% Total T1 from 4% to 6% Total 8% + Conservation Buffer 2.5% = 10.5% T3 abolished. - PowerPoint PPT Presentation
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BASLE 3 (Over Basle2)
PHILIPPE CARREL
RISK INTELLIGENCE FOR GOVERNANCE & COMPLIANCE
BASLE 3 (Over Basle 2)
Quality and consistency of capital baseT1 Equity from 2.5% to 4.5%Total T1 from 4% to 6%Total 8% + Conservation Buffer 2.5% = 10.5%T3 abolished
Leverage ratioRatio added to Pillar1 calculated with credit conversion factorsFocus on off-balance sheet itemsTrial ratio is 33 times of Tier1 limit
Counter-cyclical measuresCapital buffers from 0% to 2.5% to limit excess credit and leverageProbability of Default (PD) and Exposure At Default (EAD) computed over long termExpected Loss (EL) to replace IAS39, potentially VaR
Global Liquidity Standard (BCBS 165)LCR and NTF ratios
Enhanced risk coverageStressed VaR (includes periods of stress)Credit Value Adjustment (CVA net DVA ) to represent counterparty risk in market exposureCentralised clearing counterparties
SIFIs Additional buffers and living wills
POTENTIAL IMPACT OF BASLE 3Surge in RWA due to stressed assumptions on risk
Standard Chartered said would need $5.3bn in right issueUBS said the change would double RWA (CHF 400bn)Morgan Stanley 80%Credit Suisse estimates an increase of 70%Deutsche Bank predicts 50%JP Morgan, 36%
Higher CostsCentrally cleared derivatives will require operating costs and margin management “Skin in the game” in securitisation
Counter-cyclical measuresProbability of Default (PD) and Exposure At Default (EAD) computed over long termExpected Loss (EL) to replace IAS39Capital buffers to limit excess credit and leverage
Global Liquidity StandardPush back on NTF ratios
Core Tier1 Capital Level of US largest banks
Core Tier1 Capital Level of European largest banks
Core Tier1 Capitals Level for Asian Banks