The Supervisory Treatment of Banks’ Market Risk
In April 1993, the Basle Committee on Banking Supervision released a series of consultative papers relating to the supervisory treatment of market risk within banks' trading portfolios. The papers proposed a method of allocating capital to cover risk from banks’ trading positions in debt securities and equities, as well as exposure to foreign exchange risk across the entire bank. This study assesses the efficacy of the proposed methods for measuring risk and allocating capital to exposures from traded debt securities, traded equities and foreign exchange. The analysis draws on actual portfolio data from banks, as well as random hypothetical portfolios, measured against historical movements in debt and equity prices and exchange rates. The conclusions drawn are broadly that the capital charges generated under the proposed methods are conservative, when measured against historical changes in portfolio values. In the case of the debt securities and foreign exchange proposals, the capital charges are reasonably well correlated with risk in portfolios; higher risk portfolios attract higher capital charges. However, in the case of the equity risk proposal, this relationship is not as strong.
|Date of creation:||Dec 1994|
|Contact details of provider:|| Postal: GPO Box 3947, Sydney NSW 2001|
Web page: http://www.rba.gov.au/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp9408. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.