fed speech, 2005-11-30
To address these issues, the June 2005 Basel paper set forth a number of improvements to the trading book regulatory capital regime including: a requirement that banks have policies and procedures for determining which positions can be included in the trading book for regulatory capital purposes; stronger requirements for prudent valuation methods for trading book positions; an incremental charge for default risk not captured in the VaR-based calculation; more explicit and robust modeling standards for capturing specific risk; and a requirement that banks incorporate stress testing into their Pillar 2 internal capital requirement.
Sentiment: neutral
Topic: mp_credit