1 Solución Meycor para la Gestión de Riesgo Operacional Basel 2.
9. Basel II Presentation
Transcript of 9. Basel II Presentation
TABLE OF CONTENT
3 pillars in basel ii
motives for basel II
Application in VIetnam
1. Motives for basel ii
Problems with Basel I (1988)• Club-rules (OECD) isn’t meaningful in terms of
riskiness• Capital Requirement: One size fits all• Inadequate recognition of advanced CRM such as
CDS/securitization
Objectives• Eliminate regulatory arbitrage by getting RWA right• Provide banks incentives to enhance risk
management
1. Motives for basel II
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Text Liquidity Risk
Reputation Risk
Credit Risk
Market Risk
Operational Risk
2. Three pillars in basel II
Basel I (1988) Basel II (2004)
Pillar(s) Minimum Capital Requirement (one for all)
- Minimum K requirement- Supervisory Review- Market discipline & disclosure (more flexible)
Risk(s) Credit Risk
Credit Risk (SA, FIRB, AIRB)* SA: based on type of entity, credit rating (S&P, Moody, Fitch)* FIRB: uses loss probability model, prescribed LGD* AIRB: uses loss probability model and LGD modelOperational Risk (BIA, SA, AMA)* BIA: α * Gross Rev.* SA: β * Gross Rev./Unit Line* AMA: measured by its own systemMarket Risk (SA, Internal VaR Model)* VaR is preferred, stress test and scenario analysis
RWA(s) 0~100%, OECD is more preferred0~150% or more, no exclusive rightsTier 2 K is limited to 100% of Tier 1 K
CAR=>=8% =>=8%
* Simple measure for credit risk* Not risk sensitive* No measure for operational risk
* Significant changes to measure credit risk
basel I vs. basel II
Pillar 1: Minimum capital requirement
8%
Total Capital:Tier 1 Capital
• Common shareholder equity
• Disclosed Reserves• Non-cumulative perpetual
preferred stocks
Tier 2 & 3 Capital
• Tier 2 cannot exceed 100% tier 1
• Subordinated debts• General loans loss
reserves• Hybrid debt-equity capital
instruments
Pillar 1: Credit riskCredit Risk:• SA
- Based on external credit rating- Apply fixed risk weighting
• IRB (FIRB, AIRB)• CRM (CDS, Securitization)
Pillar 1: Market risk
Pillar 1: Operational risk
IN VIETNAM
Regulatory Framework
BASEL II Implementation
1. Regulatory framework
2005 2014
Decree 457/2005CAR: 8%
(except for foreign bank branches)
Circular 13/2010: CAR: 9% (all) Updated Circular 36/2014
1. Regulatory framework
CAR >= 9%
2. BASEL II Implementation
Credit Risk Awareness
Lending activities: 90%
Bad debt ratio is pretty high
Phase 1:2013 -2015
Phase 2:2016 - 2018
THANK YOU FOR YOUR ATTENTION
Q & A