Credit risk regulation in the Czech Republic after Basel II
AbstractIn this year, new capital adequacy regulation, known as Basel II, came into force. Based on these rules, two directives of the European Parliament and of the Council have been revised and the new decree of Czech National Bank has come into force. This new decree brings some new aspects in credit risk regulation. The aim of this paper is to characterize the main changes in credit risk regulation due to Basel II and to outline the effects on the availability of loans for nonfinancial companies. According to the new rules, the bank’s capital charge is calculated to capture credit, market and operational risk. Banks are able to choose between standardized measurement concepts and more refined internal procedures and models which should lead to reduction of capital charges. Two new methods of calculating loan loss provisions have been implemented. Limits for credit exposure of banks remained unchanged. Small and medium-sized companies should benefit both from Standardised Approach and Internal Ratings Based Approach. Corporations with good financial health should benefit from IRB Approach and corporations with rating assessment from external rating agencies will advantage of Standardised Approach. Changes in other aspects of credit risk regulation should not affect the lending activity of banks.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11901.
Date of creation: Oct 2007
Date of revision:
credit risk; Basel II; capital requirements; availability of loans; rating;
Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- Decamps, Jean-Paul & Rochet, Jean-Charles & Roger, Benoit, 2004.
"The three pillars of Basel II: optimizing the mix,"
Journal of Financial Intermediation, Elsevier,
Elsevier, vol. 13(2), pages 132-155, April.
- Décamps, Jean-Paul & Rochet, Jean-Charles & Roger, Benoît, 2003. "The Three Pillars of Basel II, Optimizing the Mix," IDEI Working Papers, Institut d'Ãconomie Industrielle (IDEI), Toulouse 179, Institut d'Économie Industrielle (IDEI), Toulouse.
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