Sungard's Mat Newman looks at a new take on risk calculations being proposed in Basel.
The rapid response to the financial crisis initiated by the
G20 has led to a plethora of new regulations which sometimes
seem like a never-ending series of sticky plasters trying to
patch up a leaky hull. No sooner has one leak been fixed (think
Stressed VaR or Incremental Risk Charge) than another springs
forth (think CVA or Wrong-Way Risk). Inevitably in times of
crisis and emergency this approach is needed to steady the
ship, but shouldn't we also be trying to steer a course to a
This seems to be the thinking behind the Basel Committee on
Banking Supervision's latest consultation document entitled
'Fundamental review of the trading book'. The aim of this
review is to set a consistent framework within which to think
about regulatory capital and, despite the name, it touches upon
the banking book as well as the trading book.
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