Adjustments to the Basel II market risk framework announced by the Basel Committee
Date: 6-19-2010 Author: Basel Committee
Visits: 200
The Basel Committee on Banking Supervision has agreed on certain adjustments to the document Revisions to the Basel II market risk framework(the market risk revisions). This revised market risk framework was released in July 2009 and covered the following areas:
- Banks using internal models in the trading book must calculate a stressed value-at-risk based on historical data from a continuous 12-month period of significant financial stress;
- Banks using internal specific risk models in the trading book must calculate an incremental risk capital charge (IRC) for credit sensitive positions which captures default and migration risk at a longer liquidity horizon;
- Securitisation positions held in the trading book will be subject to the Basel II securitisation charges, similar to securitisation positions held in the banking book; and
- So-called correlation trading books are exempted from the full treatment for securitisation positions, qualifying either for a revised standardised charge or a capital charge based on a comprehensive risk measure.
The adjustments announced today relate to elements 3 and 4 above:
