Implementing Basel II: Is the Game Worth the Candle?

In this article the author provides an extensive analysis of the various aspects of the Basel II Accord. Notwithstanding the gains from adoption of Basel II, he argues that these gains are unlikely to outweigh the costs of implementation and compliance: Basel II will be very costly for banks, home and host country supervisors, and, to the extent that it exacerbates macroeconomic cycles, to the broader economy as well.     

Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature

This paper reviews the theoretical literature on bank capital regulation and analyzes some of the approaches to redesigning the 1988 Basel Accord on capital standards. The paper starts with a review of the literature on the design of the financial system and the existence of banks. It proceeds with a presentation of the market failures that justify banking regulation and an analysis of the mechanisms that have been suggested to deal with these failures. The paper then reviews the theoretical literature on bank capital regulation. This is followed by a brief history of capital regulation since the 1988 Basel Capital Accord and a presentation of both the alternative approaches that have been put forward on setting capital standards and the Basel Committee's proposal for a new capital adequacy framework.     

On the Role of Regulatory Banking Capital

In this paper the authors study the role of regulatory banking capital and analyze the incentive effects of the Basel II Accord. They argue that Basel II may become a source of systemic risk due to endogenous risk and the risk sensitivity of the capital requirements. In this context they note that financial instability may enter via the asset side of the banks' balance sheets when banks are forced to sell assets in order to maintain the capital buffer prescribed by Basel II.     

Implementation of Basel II

In this article Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, first discusses the current status of the Basel II Accord. Next, he offers his perspective on macroeconomic issues related to the capital framework, focusing especially on pro‐cyclicality. Finally, he discusses three important Basel II implementation issues, namely calibration, validation, and cross‐border supervision.     

Risk management versus operational action: Basel II in a Swedish context

The New Basel Capital Accord, Basel II, promotes standards for measurement of financial and operational risk in the banking industry. Its approach to such risk measurement has been severely criticized in the literature, inevitably raising doubts concerning the effectiveness of Basel II. Using data from 25 semi-structured interviews with banking staff in four Swedish banks, the study suggests that Basel II is well established in practice, but there are significant concerns that such measurement of risk may adversely affect banks’ activities. Whilst Basel II is generally supported by banking staff who work directly with risk measurement, its usefulness is questioned by banking staff in operations. This difference between these two groups may be explained in relation to variations in their respective frames of reference. Both groups are inclined to take account of information that meshes well with their existing frames of reference and are thus more inclined to value changes that accord with their own viewpoints. One suggestion for addressing this schism within banks is to encourage a wider debate about the various approaches to implementing Basel II.     

Capital shocks, bank asset allocation, and the revised Basel Accord

In contrast to the 1988 Basel Accord (Basel I), the revised risk-based capital standards (Basel II) propose regulatory capital requirements based on credit ratings. This paper develops a theoretical model to analyze how banks will adjust their low and high credit risk commercial loans under the proposed newer standard. Capital-constrained banks respond to an adverse capital shock by reducing high credit risk loans, while under certain circumstances, low credit risk loans may actually increase. When compared to Basel I, it is shown that high-risk loans are reduced more under Basel II, but whether a bank reduces total lending more under Basel I or under the revised standards depends on a complex interaction of factors.     

内部评级法思想及其在商业银行风险管理中的应用

为提升国内银行的风险管理能力,银监会不断推进实施新资本协议.内部评级法作为新资本协议的核心内容,其基本思想对于商业银行提高风险管理能力具有重要指导作用.本文从内部评级法的基本思想入手,结合内部评级法在国内银行风险管理中的应用情况,提出应用内部评级法加强国内银行风险管理的政策建议.     

Sub‐Optimality of Income Statement‐Based Methods for Measuring Operational Risk under Basel II: Empirical Evidence from Spanish Banks

The New Basel Capital Accord (Basel II) was created with the intention of establishing a framework in which financial entities can manage their risks in a more detailed and efficient way. Within this general reform movement, Operational Risk emerges as a fundamental variable. OR can be managed by three alternative methods: the Basic Indicator Approach, Standard Approach and Advanced Measurement Approach. The choice of which method to adopt has become of supreme interest for senior banking managers. This study analyzes the exactitude of the underlying implicit hypotheses that support each method, distinguishing between income statement based methods and the management accounting based method. In the present study the non‐optimum character of the two Income Statement‐based methods is empirically confirmed, in the light of the data provided by Spanish financial entities.     

中国实施巴塞尔新资本协议的战略构想

纵观国际银行业,巴塞尔新资本协议在未来几年内全球范围实施已成定局。中国作为当今世界上最具经济活力和增长潜力的国家,对这一问题应该有一个明确、积极和务实的态度。本文从实际出发,结合新资本协议的技术要求,探讨了中国银行业实施内部评级法在战略上的必要性、可行性,提出了一些有价值的政策建议。     

The credit rating process and estimation of transition probabilities: A Bayesian approach

The Basel II Accord requires banks to establish rigorous statistical procedures for the estimation and validation of default and ratings transition probabilities. This raises great technical challenges when sufficient default data are not available, as is the case for low default portfolios. We develop a new model that describes the typical internal credit rating process used by banks. The model captures patterns of obligor heterogeneity and ratings migration dependence through unobserved systematic macroeconomic shocks. We describe a Bayesian hierarchical framework for model calibration from historical rating transition data, and show how the predictive performance of the model can be assessed, even with sparse event data. Finally, we analyze a rating transition data set from Standard and Poor's during 1981–2007. Our results have implications for the current Basel II policy debate on the magnitude of default probabilities assigned to low risk assets.     

新兴市场国家新资本协议实施情况及其发展趋势

本文评述了新资本协议全球实施情况,重点分析了新资本协议在新兴市场国家实施的最新进展,深入剖析了新兴市场国家实施新巴塞尔协议的战略框架和路径,探讨了实施路径、实施成本、实施基础等几个核心问题,以及对我国商业银行实施新资本协议的启示。     

Procyclicality,Bank Lending,and the Macroeconomic Implications of a Revised Basel Accord

Bank regulators are in the process of implementing revised regulatory capital standards. However, the macroeconomic effects of a revised Basel Accord are uncertain. Examining the various channels through which the revised Accord may influence economic output suggests that making the buffer stock of capital positively related to the business cycle is necessary to reduce procyclicality. This can be accomplished by bank regulators using either enhanced supervisory powers or increased financial disclosure.     

A real options approach for evaluating the implementation of a risk-sensitive capital rule in banks

I evaluate a bank's incentives to implement a risk-sensitive regulatory capital rule. The decision making is analyzed within a real options framework where optimal policies are derived in terms of threshold levels of credit risk. I provide a numerical example for the implementation of internal ratings based models for credit risk (the IRB approach) under the new Basel Accord (Basel II).     

巴塞尔协议的演变历程梳理

巴塞尔协议在金融国际化和全球化程度不断加深的大背景之下成立并随着经济形势的变化而不断演进。巴塞尔协议经历了三个历史阶段,每一次巴塞尔协议的演进都是对前一次的补充和修订,最低资本要求是三代巴塞尔协议的核心内容之一。本文旨在对巴塞尔协议的相关文件进行逻辑梳理,为其演变历程找出清晰的脉络。     

次贷危机的成因、影响及对金融监管的启示

美国次贷危机愈演愈烈已造成了全球金融危机,究其根源在于次级房屋贷款发放环节。由于包括美国政府、美联储、投资银行、评级机构、保险公司在内的各个市场参与者的共同作用,次级房屋贷款市场迅速膨胀。通过房贷-评级-卖出的证券化过程,次级贷款的风险被散播到了全球的各类投资者。金融监管机构对此次危机负有不可推卸的责任,其传统的最佳标准式的监管理念通过巴塞尔新协议等方式导致了市场行为趋同从而流动性缺失、系统性风险发生、亲周期问题显现。此外,监管机构对于高杠杆率和负债与资产错配的金融机构监管明显不足,也在一定程度上加剧了危机。     

基于情景的操作风险计量方法研究

《巴塞尔资本协议II》鼓励金融机构使用高级计量法计算监管资本,以此更加准确地反映金融机构的操作风险水平。其中,基于情景的计量法融合损失分布法、记分卡法的优势,能够更加前瞻性地计量操作风险资本。本文深入研究基于情景的计量法的流程、建模技术以及实际应用情况,提出应重视SBA在我国的应用和实践、建立完整的基于隋景的计量法体系、注重克服基于SBA可能存在的问题等建议,有利于国内银行根据实际情况考虑使用SBA计量操作风险监管资本和经济资本。     

Risk-based capital requirements for mortgage loans

We contribute to the debate over the reform of the Basel Accord by developing risk-based capital requirements for mortgage loans held in portfolio by financial intermediaries. Our approach employs simulation of both economic variables that affect default incidence and conditional loss probability distributions. Results indicate that appropriate capital charges for credit risk vary substantially with loan characteristics and portfolio geographic diversification. Hence, rules that offer little risk differentiation, including the current Basel I regime and “standardized” approach proposed in Basel II result in significant divergence between regulatory and economic capital. These results highlight the incentive problems inherent in simplified methods of capital regulation.     

《新资本协议》对商业银行信贷运行的影响——兼论其宏观经济效应

《新资本协议》的出台和实施是银行监管历史上一个具有里程碑意义的事件。本文认为,《新资本协议》特别是内部评级法极大地提高了资本监管的风险敏感度,将对商业银行的信贷增长方式、信贷结构调整和贷款损失准备计提、以及宏观经济运行产生一定的影响。按照目前我国商业银行资本充足水平和资产质量,无论是实施标准法还是内部评级法都将强化信贷扩张的资本约束效应。我国应慎重选择《新资本协议》的实施时机,避免由此对信贷供给和宏观经济运行造成的负面冲击。     

Basel II and bank lending to emerging markets: Evidence from the German banking sector

This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a comprehensive new data set on German banks’ foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new regulatory capital requirement remains below the economic capital and (ii) banks’ economic capital to emerging markets already adequately reflects risk. On both accounts the evidence indicates that the new Basel Accord should have a limited effect on lending to emerging markets.     

The three pillars of Basel II: optimizing the mix

The on-going reform of the Basel Accord relies on three “pillars”: a new capital adequacy requirement, supervisory review and market discipline. This article develops a simple continuous-time model of commercial banks' behavior where interaction between these three instruments can be analyzed. We study the conditions under which market discipline can reduce the minimum capital requirements needed to prevent moral hazard. We also discuss regulatory forbearance issues.