Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. It is now extended and partially superseded by Basel III.
The Basel II Accord was published in June 2004. It was a new framework for international banking standards, superseding the Basel I framework, to determine the minimum capital that banks should hold to guard against the financial and operational risks. The regulations aimed to ensure that the more significant the risk a bank is exposed to, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability. Basel II attempted to accomplish this by establishing risk and capital management requirements to ensure that a bank has adequate capital for the risk the bank exposes itself to through its lending, investment and trading activities. One focus was to maintain sufficient consistency of regulations so to limit competitive inequality amongst internationally active banks.
Basel II was implemented in 2008 in most major economies. The financial crisis of 2007–2008 intervened before Basel II could become fully effective. As Basel III was negotiated, the crisis was top of mind and accordingly more stringent standards were contemplated and quickly adopted in some key countries including in Europe and the US.
The final version aims at:
Ensuring that capital allocation is more risk-sensitive;
Enhancing disclosure requirements which would allow market participants to assess the capital adequacy of an institution;
Ensuring that credit risk, operational risk and market risk are quantified based on data and formal techniques;
Attempting to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage.
While the final accord has at large addressed the regulatory arbitrage issue, there are still areas where regulatory capital requirements will diverge from the economic capital.
This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.
The students learn different financial risk measures and their risk theoretical properties. They learn how to design and implement risk engines, with model estimation, forecast, reporting and validati
This course is an introduction to quantitative risk management that covers standard statistical methods, multivariate risk factor models, non-linear dependence structures (copula models), as well as p
The 2007–2008 financial crisis, or Global Financial Crisis (GFC), was a severe worldwide economic crisis that occurred in the early 21st century. It was the most serious financial crisis since the Great Depression (1929). Predatory lending targeting low-income homebuyers, excessive risk-taking by global financial institutions, and the bursting of the United States housing bubble culminated in a "perfect storm". Mortgage-backed securities (MBS) tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value.
Operational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as operational risk management.
A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets. These requirements are put into place to ensure that these institutions do not take on excess leverage and risk becoming insolvent. Capital requirements govern the ratio of equity to debt, recorded on the liabilities and equity side of a firm's balance sheet.
Covers the fundamentals of financial risk management, including types of risk, historical developments, regulatory events, and the challenges in quantitative risk management.
This thesis studies the origins and consequences of financial crises, and computational techniques to solve continuous-time economic models that explain such crises. The first chapter shows that financial recessions are typically characterised by a large r ...
In this dissertation, I develop theory and evidence to argue that new technologies are central to how firms organize to create and capture value. I use computational methods such as reinforcement learning and probabilistic topic modeling to investigate thr ...
Emerging technologies such as artificial intelligence, gene editing, nanotechnology, neurotechnology and robotics, which were originally unrelated or separated, are becoming more closely integrated. Consequently, the boundaries between the physical-biologi ...