Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America
Banks' market or 'trading' risks have increased noticeably over the past years, largely as a result of the growth of liquid assets on banks' balance sheets and the increase in banks' off-balance sheet activities. Well-publicized bank failures and significant capital losses have focussed further attention on these developments. In January 1996, the Basle Committee recommended the imposition of capital charges related to banks' trading risks, and the European Community's Capital Adequacy Directive (CAD) came into force on January 1st, adopting, in part, the Basle Amendment. The G10 countries are committed to full implementation of these recommendations by the end of 1997. This paper reviews the main features of the Basle Amendment, which allows banks a choice between a 'standardized methodology' and the use of their own internal models, subject to the authorization of the relevant supervisor and a set of parameter values. The relevance of this regulation for Latin America is analysed in the light of the region's characteristics. We suggest that these characteristics increase rather than diminish the importance of the implementation of market risk capital requirements in Latin America.
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Format: | Working Papers biblioteca |
Language: | English |
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Inter-American Development Bank
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Subjects: | Financial Market, Investment, Integration and Trade, Productivity, capital requirements;market risks;WP-347;commercial banks, |
Online Access: | http://dx.doi.org/10.18235/0011539 https://publications.iadb.org/en/capital-requirements-latin-american-banks-relation-their-market-risks-relevance-basle-1996 |
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dig-bid-node-119192024-05-30T20:30:06ZCapital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America 1997-01-01T00:00:00+0000 http://dx.doi.org/10.18235/0011539 https://publications.iadb.org/en/capital-requirements-latin-american-banks-relation-their-market-risks-relevance-basle-1996 Inter-American Development Bank Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks Banks' market or 'trading' risks have increased noticeably over the past years, largely as a result of the growth of liquid assets on banks' balance sheets and the increase in banks' off-balance sheet activities. Well-publicized bank failures and significant capital losses have focussed further attention on these developments. In January 1996, the Basle Committee recommended the imposition of capital charges related to banks' trading risks, and the European Community's Capital Adequacy Directive (CAD) came into force on January 1st, adopting, in part, the Basle Amendment. The G10 countries are committed to full implementation of these recommendations by the end of 1997. This paper reviews the main features of the Basle Amendment, which allows banks a choice between a 'standardized methodology' and the use of their own internal models, subject to the authorization of the relevant supervisor and a set of parameter values. The relevance of this regulation for Latin America is analysed in the light of the region's characteristics. We suggest that these characteristics increase rather than diminish the importance of the implementation of market risk capital requirements in Latin America. Inter-American Development Bank Andrew Powell Verónica Balzarotti Working Papers application/pdf IDB Publications Latin America en |
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Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks |
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Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks Inter-American Development Bank Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
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Banks' market or 'trading' risks have increased noticeably over the past years, largely as a result of the growth of liquid assets on banks' balance sheets and the increase in banks' off-balance sheet activities. Well-publicized bank failures and significant capital losses have focussed further attention on these developments. In January 1996, the Basle Committee recommended the imposition of capital charges related to banks' trading risks, and the European Community's Capital Adequacy Directive (CAD) came into force on January 1st, adopting, in part, the Basle Amendment. The G10 countries are committed to full implementation of these recommendations by the end of 1997. This paper reviews the main features of the Basle Amendment, which allows banks a choice between a 'standardized methodology' and the use of their own internal models, subject to the authorization of the relevant supervisor and a set of parameter values. The relevance of this regulation for Latin America is analysed in the light of the region's characteristics. We suggest that these characteristics increase rather than diminish the importance of the implementation of market risk capital requirements in Latin America. |
author2 |
Andrew Powell |
author_facet |
Andrew Powell Inter-American Development Bank |
format |
Working Papers |
topic_facet |
Financial Market Investment Integration and Trade Productivity capital requirements;market risks;WP-347;commercial banks |
author |
Inter-American Development Bank |
author_sort |
Inter-American Development Bank |
title |
Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
title_short |
Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
title_full |
Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
title_fullStr |
Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
title_full_unstemmed |
Capital Requirements for Latin American Banks in Relation to their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America |
title_sort |
capital requirements for latin american banks in relation to their market risks: the relevance of the basle 1996 amendment to latin america |
publisher |
Inter-American Development Bank |
url |
http://dx.doi.org/10.18235/0011539 https://publications.iadb.org/en/capital-requirements-latin-american-banks-relation-their-market-risks-relevance-basle-1996 |
work_keys_str_mv |
AT interamericandevelopmentbank capitalrequirementsforlatinamericanbanksinrelationtotheirmarketriskstherelevanceofthebasle1996amendmenttolatinamerica |
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