Capital adequacy and Credit event: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Update for further transition to Basel III.)
 
imported>Doug Williamson
(Add link.)
 
Line 1: Line 1:
1.  
1.


Capital adequacy is the system of regulating banks (and other financial institutions) by requiring them to maintain minimum acceptable levels of capital, adequate to absorb their potential credit losses and other trading losses.
An event defined in a credit derivative agreement evidencing a weakening of the creditworthiness of a borrower, and triggering obligations under the credit derivative contract.




2.
2.


The term 'capital adequacy' also refers to the prevailing minimum amount of risk weighted capital that banks are required to maintain in proportion to the risk assets that they assume, normally used in connection with the requirements laid down internationally by the Bank for International Settlements (BIS) and monitored by domestic central banks.  
Any event evidencing a weakening of creditworthiness.


Historically, the BIS capital adequacy standard was 8%.
For example, failing to pay interest or capital under a loan agreement, or any other event of default under a loan agreement.
 
Under the Basel III framework this standard is increased (strengthened) substantially - very roughly doubled - and its measurement is refined.  




== See also ==
== See also ==
* [[Bank for International Settlements]]
* [[Credit]]
* [[Basel II]]
* [[Credit derivative]]
* [[Basel 2.5]]
* [[Creditworthiness]]
* [[Basel III]]
* [[Default]]
* [[Capital Adequacy Directive]]
* [[Event risk]]
* [[Capital Requirements Directive]]
* [[Common equity]]
* [[Countercyclical buffer]]
* [[Economic capital]]
* [[IRB]]
* [[IRRBB]]
* [[GCLAC]]
* [[ICAAP]]
* [[Microprudential]]
* [[Pillar 1]]
* [[Pillar 2]]
* [[Pillar 3]]
* [[Primary Loss Absorbing Capital]]
* [[Regulatory capital]]
* [[Reserve requirements]]
* [[RWAs]]
* [[Settlement risk]]
* [[Slotting]]


[[Category:Compliance_and_audit]]
[[Category:Manage_risks]]

Latest revision as of 12:00, 6 July 2022

1.

An event defined in a credit derivative agreement evidencing a weakening of the creditworthiness of a borrower, and triggering obligations under the credit derivative contract.


2.

Any event evidencing a weakening of creditworthiness.

For example, failing to pay interest or capital under a loan agreement, or any other event of default under a loan agreement.


See also