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Basel III Versus Solvency II: An Analysis of Regulatory Consistency Under the New Capital Standards

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  • Daniela Laas
  • Caroline Franziska Siegel

Abstract

This article provides a critical analysis of the consistency of the standard approaches for market and credit risks under Solvency II and the current and forthcoming Basel III standards. The comparability is assessed both theoretically via a detailed comparison of the capital standards and in a numerical analysis that contrasts the capital charges for a stylized portfolio. Our examination reveals substantial discrepancies in the design of the frameworks. These lead to vastly differing capital requirements for the same risks. Moreover, the analysis indicates higher charges for banks than insurers, especially under the proposed new Basel III standard approaches.

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  • Daniela Laas & Caroline Franziska Siegel, 2017. "Basel III Versus Solvency II: An Analysis of Regulatory Consistency Under the New Capital Standards," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(4), pages 1231-1267, December.
    • Handle: RePEc:bla:jrinsu:v:84:y:2017:i:4:p:1231-1267
    DOI: 10.1111/jori.12154
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    Cited by:

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    2. Laurens Swinkels & David Blitz & Winfried Hallerbach & Pim Vliet, 2018. "Equity Solvency Capital Requirements - What Institutional Regulation Can Learn from Private Investor Regulation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(4), pages 633-652, October.
    3. Liu, Shuyan & Jia, Ruo & Zhao, Yulong & Sun, Qixiang, 2019. "Global consistent or market-oriented? A quantitative assessment of RBC standards, solvency II, and C-ROSS," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    4. Gilles Boevi Koumou & Georges Dionne, 2022. "Coherent Diversification Measures in Portfolio Theory: An Axiomatic Foundation," Risks, MDPI, vol. 10(11), pages 1-19, October.
    5. Zweifel Peter, 2019. "Planned Solvency III Regulation: Should It Be Adopted Outside the European Union?," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 13(1), pages 1-12, January.
    6. Hu, Bin & Hu, Yan-Ping, 2024. "Pricing models for small and micro loan portfolio insurance," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    7. Hu, Bin & Hu, Yan-Ping, 2024. "A pricing model system for small and micro loan insurance considering limited claims," International Review of Financial Analysis, Elsevier, vol. 93(C).

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