Grievous era

4 November 2013 By George Hay Follow @gfhay

Banks have long been allowed to rely on their own models to calculate capital strength. The Basel Committee’s latest proposals would force lenders to disclose positions using a more standardised template. If passed, that would mark a historic, and welcome, return of common sense.

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Basel published its second consultation of its fundamental review of the trading book on Oct. 31. The consultation period runs until Jan. 31.
The 1996 “Market Risk Amendment,” a major adaptation of the 1988 Basel Accord, introduced additional capital charges against banks’ exposures to market risk. These were based on two alternative methodologies: a standardised approach using formula-based, regulatory-determined capital charges; and, subject to supervisory approval, a bank’s internal Value at Risk (VaR) model.

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