Chapter 7 Bank Regulation and Basel II 风险管理与金融机构PPT（英文）.pptVIP

Bank Regulation and Basel II Chapter 7 History of Bank Regulation Pre-1988 1988: BIS Accord (Basel I) 1996: Amendment to BIS Accord 1999: Basel II first proposed The Model used by Regulators (Figure 7.1, page 166) Pre-1988 Banks were regulated using balance sheet measures such as capital:assets Definitions and required ratios varied from country to country Enforcement of regulations varied from country to country Bank leverage increased in 1980s Off-balance sheet derivatives trading increased Third world debt was a major problem Basel Committee on Bank Supervision set up 1988: BIS Accord (page 169) Assets:Capital must be less than 20. Assets includes off-balance sheet items that are direct credit substitutes such as letters of credit and guarantees Cooke Ratio: Capital must be 8% of risk weighted amount. At least 50% of capital must be Tier 1. Types of Capital (page 172) Tier 1 Capital: common equity, non-cumulative perpetual preferred shares, minority interests in consolidated subsidiaries less goodwill Tier 2 Capital: cumulative preferred stock, certain types of 99-year debentures, subordinated debt with an original life of more than 5 years Risk-Weighted Capital A risk weight is applied to each on-balance- sheet asset according to its risk (e.g. 0% to cash and govt bonds; 20% to claims on OECD banks; 50% to residential mortgages; 100% to corporate loans, corporate bonds, etc.) For each off-balance-sheet item we first calculate a credit equivalent amount and then apply a risk weight Risk weighted amount (RWA) consists of sum of risk weight times asset amount for on-balance sheet items Sum of risk weight times credit equivalent amount for off-balance sheet items Credit Equivalent Amount The credit equivalent amount is calculated as the current replacement cost (if positive) plus an add on factor The add on amount varies from instrument to instrument (e.g. 0.5% for a 1-5 year swap; 5.0% for a 1-5 year foreign currency swap) Add-on Factors (%