BASEL III – Risk Exposed

The final approvals for the BASEL III capital standards provided by US regulators. Was going through one of the article published in imagesAmerican Banker written by Clifford Rossi, opens up that implementing robust capital standards that give individual institutions sufficient buffers from extreme events and protect the system at-large has been a major challenge for regulators and the Basel Committee since the inception of risk-based capital charges years ago. However, over reliance on analytic methods that failed miserably during the crisis puts the entire system at risk while creating enormous burdens on institutions and regulators to closely oversee these models.   Continue reading “BASEL III – Risk Exposed”

Draft of the Brown-Vitter bill,

Basel

The largest U.S. banks… would have to hold capital in excess of Basel III standards under a proposal being drafted by Senate Democrats and Republicans to curb the size of too-big-to-fail banks.
The current draft of the legislation would require U.S. regulators to replace Basel III requirements with a higher capital standard: 10 percent for all banks and an additional surcharge of 5 percent for institutions with more than $400 billion in assets. Continue reading “Draft of the Brown-Vitter bill,”

The case of Derivative On Its Derivatives : Credit Suisse

Zürich: Paradeplatz - Hauptsitz der Credit Suisse

There is a very interesting case thought of sharing across on the CDS market which may results in to two possible futures for the big banks. In one, the various efforts to “make banking boring” – more onerous capital and liquidity regulation, clearing and futurization of derivatives, bans on prop trading, calls to break up big banks, and so forth – would create amazing opportunities for people with the intelligence, motivation, and shall we say aesthetic sensibilities to find new ways to accomplish their non-boring goals within a shifting framework. Just like changes in the tax code create work for smart tax lawyers, so changes in banking regulation Continue reading “The case of Derivative On Its Derivatives : Credit Suisse”

Basel’s Diluted Liquidity Rule Compounds Capital Failure

This weekend banks got a big win from Basel, easing liquidity requirements more than expected. Banks surged after screen shot 2013-01-07 at 4.33.27 amunexpected win over the weekend.

How memories fade. Five years ago the UK had witnessed the first run on a bank – Northern Rock – since 1866 while the panic that followed a year later when Lehman Brothers collapsed led to £65bn of taxpayer money being poured into Royal Bank of Scotland, Lloyds and HBOS.

Indeed in 2010 Lord Turner, chairman of the Continue reading “Basel’s Diluted Liquidity Rule Compounds Capital Failure”

Basel Becomes Babel

A very good analysis done on the various Basel agreements at Bloomberg here are some highlights from it.traders

The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations.

The complexity is emblematic of what happened over the past four years Continue reading “Basel Becomes Babel”