the revised standardised approach - world...
TRANSCRIPT
October 19, 2015
Caio Ferreira
The Revised Standardised
Approach
Regulatory Reform:
2
Basel Committee 2008- 2015
(3Q):
79 Standards
52 Guidelines
15 Sound Practices
40 Implementation reports
37 Others
Capital Framework
3
K
RWACAR =
Basel III
Under
Discussion
RWA Inconsistency - BB
4 Source: Basel Committee. Regulatory Consistency Assessment Programme. Analysis of risk-weighted assets for credit risk in the banking book. July 2013
RWA Inconsistency - TB
5 Source: Basel Committee. Regulatory Consistency Assessment Programme. Second report on risk-weighted assets for market risk in the trading book.
December 2013
Sensitivity, simplicity and comparability:
6
Comparability
Confidence in RWA
Simplicity
Enforcement
Market discipline
Sensitivity
Incentives
Financial Innovation
RWA Approaches
7
Pillar 1
Charges
Credit risk
Market risk
Operational risk
FAIRB
AIRB
Internal Models Standardized
Cred. Standardized
IMM Market Standardized
BIA
TFSA / ASAAMA
Revisions underway:
8
Why to revised SA?
9
100% RW
Basel I Basel II
0%10%
20%30%
40%
50%80%
100%300%
900%
Risk
Sensitivity
Why to revised SA?
10
Credit
Assessment
AAA to
AA-
A+ to A- BBB+ to
BB-
Bellow
BB-
Unrated
Risk Weight 20% 50% 100% 150% 100%
• Corporate Exposures (current framework)
- Risk sensitive ?
Why to revised SA?
11
• Lack of risk sensitivity
Granularity
Unrated exposures
• Excessive use of ratings
mechanistic reliance
unrated exposures
• Miscalibration Out-of-date
relative terms
• Complexity lack of clarity
number of approaches
Key Design Questions
12
What’s the
Scope?
What kind
of model?What does
standardized
mean?
Global
framework?
Wider
range of
banks
No
substitute
for CRA or
IRB
limited
subjectivity
Avoid
regulatory
fragmentation
Road Map
13
The Revised Framework:
14
• Sovereigns - not in the scope
• PSE – not in the scope
-National discretion: - PSE as sovereign
0% own sovereign
The Revised Framework:
15
Banks
- Short term: 20 pp lower (subject to 30% floor)
The Revised Framework:
16
Banks - Policy Issues
• Investment Banks
• Non Basel III countries
• Country risk
The Revised Framework:
17
Corporates
-Specialised Lending
- PF, OF, CF, IPRE : 120%
- ADC: 150%
- Equity / Subordinated debt : 300% or 400%
The Revised Framework:
18
Corporates - Policy Issues
• Very diverse class- low explanatory power
- risk drivers should be different
• SMEs “penalization”
• Specialized lending too punitive
The Revised Framework:
19
Residencial Real Estate
The Revised Framework:
20
RRE- Policy Issues
• Risk drivers thresholds
• Country specific?
• Pro-ciclicality•Monitoring?
The Revised Framework:
21
Comercial Real Estate
• Option A : -No mitigant
- 50% under conservative circumstances
• Option B:
The Revised Framework:
22
CRE - Policy Issues
• collateral might increase risk weight
The Revised Framework:
23
Retail
• Risk weight 75%- Relevant asset class?
- Appropriate risk drivers?
• Objective Criteria- Exposure size: EUR $ 1 MM
- Diversification: 0,2%
The Revised Framework:
24
OFF Balance Exposures
The Revised Framework:
25
Credit Risk Mitigation
The Revised Framework:
26
Other Policy issues:
• Use of ratings
- No mechanistic reliance
- Limited role ?
• Calibration- current levels ?
The Revised Framework:
27
Country Implications
•Markets are different
• Certainly a lot of room for improvement- risk sensitivity
- economic reality
• Calibration issues
The Revised Framework:
28
Country Implications
• What is the best course of action for
jurisdictions that have not implemented BII?
- Case by case cost benefits analysis
The Revised Framework:
29
Basel II Implementation
Benefits• Better capitalization?
• Risk sensitivity?
• Risk Management?
• Alignment with International Standards ?
Implementation costs• Substantial for Banks and supervisors.
- Particularly for Mkt risk
The Revised Framework:
30
Country Implications
• BIII benefits are more tangible• Stronger definition of capital
• Liquidity requirement
• Macro dimension (buffers / SIBs)
• Most BIII features are independent from BII
• Some may be hard to implement• Need granular information (LCR)
• Institutional development (CCB)
The Revised Framework:
31
Country Implications
If not advanced in the process…• Postpone BII standardized implementation
• Prioritize:
- BIII definition of Capital;
- DSIBs surcharge;
-New PIII disclosure requirements;
Depending on the stage of development- LCR (or a simplified version)
- CCB
- PII surcharges
