Basel Committee On Banking Supervision Revises Standards On Minimum Capital Requirements For Market Risk

Author:Shearman & Sterling LLP
Profession:Shearman & Sterling LLP

On January 14, 2016, the Basel Committee published revised standards on minimum capital requirements for market risk, which form part of the new market risk framework as endorsed by the Group of Central Bank Governors and Heads of Supervision, known as GHOS, the Basel Committee's governing body. Improvements in the new risk framework include: (i) a revised boundary between the banking and trading books that will reduce scope for arbitrage; (ii) a revised internal models approach with more coherent and comprehensive risk capture; (iii) an enhanced model approval process and more prudent recognition of hedging and portfolio diversification; and (iv) a revised Standardized Approach that serves as a credible fall-back and floor to the model-based approach and facilitates more consistent and comparable reporting of market risk across banks and jurisdictions. The Basel Committee will also finalize its efforts to address the problem of excessive variability in risk-weighted assets by the end of this...

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