Capital adequacy: Difference between revisions
imported>Doug Williamson (Update from current to prevailing.) |
imported>Doug Williamson (Update for further transition to Basel III.) |
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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. | |||
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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. | 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. | ||
Historically the BIS standard | Historically, the BIS capital adequacy standard was 8%. | ||
Under Basel III this standard | Under the Basel III framework this standard is increased (strengthened) substantially - very roughly doubled - and its measurement is refined. | ||
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* [[Bank for International Settlements]] | * [[Bank for International Settlements]] | ||
* [[Basel II]] | * [[Basel II]] | ||
* [[Basel 2.5]] | |||
* [[Basel III]] | * [[Basel III]] | ||
* [[Capital Adequacy Directive]] | * [[Capital Adequacy Directive]] | ||
* [[Capital Requirements Directive]] | * [[Capital Requirements Directive]] | ||
* [[Common equity]] | |||
* [[Countercyclical buffer]] | * [[Countercyclical buffer]] | ||
* [[ | * [[Economic capital]] | ||
* [[IRB]] | |||
* [[IRRBB]] | |||
* [[GCLAC]] | * [[GCLAC]] | ||
* [[ICAAP]] | |||
* [[Microprudential]] | * [[Microprudential]] | ||
* [[Pillar 1]] | |||
* [[Pillar 2]] | |||
* [[Pillar 3]] | |||
* [[Primary Loss Absorbing Capital]] | |||
* [[Regulatory capital]] | |||
* [[Reserve requirements]] | |||
* [[RWAs]] | |||
* [[Settlement risk]] | * [[Settlement risk]] | ||
* [[Slotting]] | * [[Slotting]] | ||
[[Category:Compliance_and_audit]] | [[Category:Compliance_and_audit]] | ||
Revision as of 20:35, 4 February 2018
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.
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.
Historically, the BIS capital adequacy standard was 8%.
Under the Basel III framework this standard is increased (strengthened) substantially - very roughly doubled - and its measurement is refined.
See also
- Bank for International Settlements
- Basel II
- Basel 2.5
- Basel III
- Capital Adequacy Directive
- 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
