Basel III: Enhancements to Basel II: Firm-specific changes
4 mins read Basel II framework and global banking regulations weaknesses and loopholes were exposed in the recent financial crisis. The ineffectiveness of
4 mins read Basel II framework and global banking regulations weaknesses and loopholes were exposed in the recent financial crisis. The ineffectiveness of
2 mins read We cover some of the ways in which liquidity risk may be stress tested under the Internal Capital Adequacy and Assessment Process (ICAAP). These involve simple sensitivity analysis techniques, such as applying liquidity and interest rate shocks to the assets and liabilities of the bank.
< 1 min read A look at how stress test shocks are applied to various elements of the profitability analysis to determine their impacts on the profitability of the bank’s loan portfolio.
3 mins read In this post we discuss one way of stress testing a rating grades transition matrix. The stressed transition matrix will then be used in the other credit risk quantification calculations. The revised results will be compared to the original credit risk quantification calculations to determine the impact of the stress test.
< 1 min read In this post we will go through the step-by-step methodology of carrying out a profitability analysis of the bank’s loan portfolio. This in itself is a kind of a stress test for credit risk under the Internal Capital Adequacy and Assessment Process (ICAAP) as it also computes a worst case profitability scenario.
< 1 min read In this post we will consider how to derive expected classification rates for “current” customers of a loan portfolio. This is used to calculate the expected “current” customers who will be classified within the next period, which will in turn be used in the quantification process of credit risk under the Internal Capital Adequacy and Assessment Process (ICAAP).