Common Equity Tier 1 and Currency risk: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Remove surplus link.)
 
imported>Doug Williamson
(Align with qualifications material.)
 
Line 1: Line 1:
''Banking.''
The risk of losses or other adverse effects resulting from a change in a foreign exchange rate, or from other unfavourable changes in relation to a foreign currency.  


(CET1).
Examples include:


Common Equity Tier 1 capital.
(i) a final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk), or




The highest quality form of regulatory capital under Basel III and CRD IV.
(ii) a change in asset/liability values in a balance sheet, profit/loss in an income statement (translation risk), or


It includes common equity shares (ordinary shares) and share premium, together with most equity reserves, less regulatory deductions.


(iii) a change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk).


This capital has the greatest degree of subordination to all other claims on the bank's assets.


For this reason, it has the best loss-absorbing capacity and quality from the perspectives of the bank and its supervisors.
A more complex area of risk concerns contingent, or pre-transaction risk.




Sometimes known as Core Equity Tier 1.
Also known as Currency exposure or Foreign exchange risk.




==See also==


* [[Additional Tier 1]]
== See also ==
* [[Bank supervision]]
* [[Contingent risk]]
* [[Basel II]]
* [[Cross-currency interest rate swap]]
* [[Basel III]]
* [[Foreign exchange risk]]
* [[Capital adequacy]]
* [[Transaction exposure]]
* [[Capital Requirements Directive]]
* [[Translation exposure]]
* [[CET1 ratio]]
 
* [[Common equity]]
 
* [[CRD IV]]
===Other links===
* [[Equity]]
[http://www.treasurers.org/node/5281 Currency risk, Will Spinney, ACT 2009]
* [[Ordinary shares]]
* [[Own funds]]
* [[Subordination]]
* [[T2]]
* [[Tier 1]]
* [[Tier 2]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Long_term_funding]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]

Revision as of 09:36, 1 June 2015

The risk of losses or other adverse effects resulting from a change in a foreign exchange rate, or from other unfavourable changes in relation to a foreign currency.

Examples include:

(i) a final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk), or


(ii) a change in asset/liability values in a balance sheet, profit/loss in an income statement (translation risk), or


(iii) a change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk).


A more complex area of risk concerns contingent, or pre-transaction risk.


Also known as Currency exposure or Foreign exchange risk.


See also


Other links

Currency risk, Will Spinney, ACT 2009

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Common_Equity_Tier_1&oldid=13100’