Economic and regulatory capital allocation for revolving retail exposures
By: Roberto Perli and William I. Nayda.
Contributors: Nayda, William I.
Series: Finance and economics discussion series ;; 2003-39; Finance and economics discussion series (Online) ;; 2003-39.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "The latest revision of the Internal Ratings Based approach of the Basel Committee on Banking Supervision's New Capital Accord Proposal for retail portfolios contains a significant innovation relative to previous versions: the recognition that, for revolving credits, future margin income will be available to cover losses before a bank's capital is threatened.  We assemble a mini-portfolio of revolving exposures and we compare the capital charges generated by the latest Basel's formula with the capital charges generated by two possible earnings-at-risk internal capital allocation models.  We find that in general, Basel's capital ratios are closer to those generated by our models for the groups with lower credit risk.  We attribute the discrepancies to the different ways Basel and our models account for future margin income, to Basel assumptions about asset correlations, and to one our models taking macroeconomic conditions explicitly into account"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/23/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.