Premium and Risk Weighted Assets: Difference between pages

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imported>Doug Williamson
(Add definition. Source: BIS https://www.bis.org/publ/qtrpdf/r_qt1809h.htm)
 
imported>Doug Williamson
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1. ''Options.''
''Bank supervision - capital adequacy''.


The amount payable by the buyer of an option to the option writer for the right to deal on the terms contained in the option.
(RWAs).


Risk Weighted Assets provide a measure of the total scale and risk of a regulated bank's activities, against which the bank is required to hold minimum levels of regulatory capital.


2. ''Insurance.''


The amount payable by an insured to the insurer in return for the protection set out in the terms of the insurance policy.
In simple terms, assets are multiplied by appropriate risk weightings - historically ranging from 0% to 100% depending on the level of risk - and aggregated.


Other risks, including operational risk and off balance sheet risk, are also appropriately evaluated and risk weighted, adding additional RWAs to the regulatory total.


3. ''Bonds.''


A bond trading in the market ''at a premium'' has a market value greater than its par value.
The calculation of RWAs has been increasingly refined over time.


Risk weights may, in some cases, be derived from individual banks' own internal risk models, subject to the regulator's approval.


4. ''Foreign currency.''
Other risk weightings are determined on a standardised basis for all banks.


A foreign currency trading ''at a premium'' in the forward foreign exchange market is stronger in the forward market, than in the spot market.


Also known as ''total risk weighted exposure''.


5.


Higher-quality, in relation to a product or service.
==See also==
*[[Bank supervision]]
*[[Basel 3.1]]
*[[Capital]]
*[[Capital adequacy]]
*[[CET1 ratio]]
*[[Credit Conversion Factor]]  (CCF)
*[[Off balance sheet risk]]
*[[Operational risk]]
*[[Pillar 1]]
*[[Total capital ratio]]


The premium quality is normally reflected in higher pricing or other additional costs.
[[Category:Accounting,_tax_and_regulation]]
 
[[Category:The_business_context]]
 
6.
 
An additional amount within a purchase price, reflecting additional benefits.
 
For example, a control premium in valuing a company.
 
 
7. ''Investment returns''.
 
Additional return required or expected by investors in certain assets.
 
For example, a term premium on longer maturity bonds.
 
 
== See also ==
* [[Bond]]
* [[Control premium]]
* [[Discount]]
* [[Foreign currency]]
* [[Forward premium]]
* [[Insurance]]
* [[Market value]]
* [[Option]]
* [[Option holder]]
* [[Par value]]
* [[Premium Listing]]
* [[Redemption]]
* [[Return]]
* [[Term premium]]
 
[[Category:Long_term_funding]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]

Revision as of 22:57, 28 February 2023

Bank supervision - capital adequacy.

(RWAs).

Risk Weighted Assets provide a measure of the total scale and risk of a regulated bank's activities, against which the bank is required to hold minimum levels of regulatory capital.


In simple terms, assets are multiplied by appropriate risk weightings - historically ranging from 0% to 100% depending on the level of risk - and aggregated.

Other risks, including operational risk and off balance sheet risk, are also appropriately evaluated and risk weighted, adding additional RWAs to the regulatory total.


The calculation of RWAs has been increasingly refined over time.

Risk weights may, in some cases, be derived from individual banks' own internal risk models, subject to the regulator's approval.

Other risk weightings are determined on a standardised basis for all banks.


Also known as total risk weighted exposure.


See also

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