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2018 | OriginalPaper | Chapter

3. Impact Assessment Methodology

Authors : Ioannis Akkizidis, Lampros Kalyvas

Published in: Final Basel III Modelling

Publisher: Springer International Publishing

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Abstract

The current chapter describes the formulae that quantify the impact of the transition from the current to the final Basel III framework. First, it presents the core regulatory ratios that banks need to comply with their minimum capital requirements, that is, the risk-based capital ratio and the leverage ratio. Then, it presents the typology for assessing the impact of the implementation of the final Basel III framework, at the level of the minimum required capital. It also suggests the formulation for the evaluation of the capital shortfall that the new framework implies, assuming that the current actual regulatory capital is entirely assigned to Pillar I capital requirements.

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previous chapter The Roadmap to the Final Basel III

next chapter Credit Risk: Aspects of Implementation

A measure close but not identical to accounting total assets.

For example, the minimum required total capital ratio under Basel III is 8% of the RWA while the minimum required Tier1 capital ratio is 6% of the RWA.

Hence, the delay in the BCBS agreement.

To fully comply with the final Basel III framework one should take into account the TLAC requirement which is not covered in the book.

Mainly due to Pillar II add-ons.

For details on the definition of provisions and the detailed calculation of the surplus and deficit of provisions compared to the expected losses, see BCBS (2011).

According to the BCBS provisions (BCBS, 2011: 22, para 73) the deficit of provisions is deductible from the CET1 capital. Given that the CET1 is a subset of Tier1, the one-to-one deduction from CET1 has the same effect.

The D-SIBs are set by the national competent authorities after expert judgement. In Europe, the list of other systematically important institutions (the equivalent of D-SIBs) is set out by the European Banking Authority under the following link: http://www.eba.europa.eu/risk-analysis-and-data/other-systemically-important-institutions-o-siis-/2016

The analysis does not take into account the partial implementation of the capital conservation buffer which some jurisdictions may apply for a transitional period until the full implementation of Basel III.

Basel Committee on Banking Supervision. (2006, June). Basel II: International convergence of capital measurement and capital standards: A revised framework – comprehensive version. Retrieved December 2016, from http://www.bis.org/publ/bcbs128.pdf

Basel Committee on Banking Supervision. (2011, June). Basel III: A global regulatory framework for more resilient banks and banking systems – revised version. Retrieved December 2016, from http://www.bis.org/publ/bcbs189.pdf

Basel Committee on Banking Supervision (BCBS). (2015, July). Review of the Credit Valuation Adjustment (CVA) risk framework – consultative document. Retrieved July 2015, from http://www.bis.org/bcbs/publ/d325.pdf

Basel Committee on Banking Supervision (BCBS). (2016a, January). Minimum capital requirements for market risk – Standards. Retrieved January 2016, from http://www.bis.org/bcbs/publ/d352.pdf

Basel Committee on Banking Supervision (BCBS). (2016d, April). Revisions to the Basel III leverage ratio framework – consultative document. Retrieved March 2016, from http://www.bis.org/bcbs/publ/d365.pdf

Basel Committee on Banking Supervision (BCBS). (2017a, June). Simplified alternative to the standardised approach to market risk capital requirements – consultative document. Retrieved June 2017, from http://www.bis.org/bcbs/publ/d408.pdf.

Basel Committee on Banking Supervision (BCBS). (2017b, June). Basel III monitoring report. Retrieved September 2017, from https://www.bis.org/bcbs/publ/d416.pdf

Basel Committee on Banking Supervision (BCBS). (2017c, December). Basel III: Finalising post-crisis reforms – Standards. Retrieved December 7, 2017, from https://www.bis.org/bcbs/publ/d424.pdf

Title: Impact Assessment Methodology
Authors: Ioannis Akkizidis
Lampros Kalyvas
Publisher: Springer International Publishing
Book: Final Basel III Modelling
Print ISBN: 978-3-319-70424-1

Electronic ISBN: 978-3-319-70425-8

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-3-319-70425-8_3