Title: Basel II: Capital requirements for equity investment portfolios
Authors: Suarez, F
Dhaene, Jan
Henrard, L
Vanduffel, Steven
Issue Date: 2006
Publisher: K.U.Leuven - Faculty of Economics and Applied Economics
Series Title: DTEW - AFI_0602 pages:1-10
Abstract: The Basel Accords represent landmark financial agreements for the regulation of commercial banks. The main purpose of the accords was to strengthen the soundness and stability of the international banking system by providing a minimum standard for capital requirements. In 2004, the Basel Committee proposed new guidelines, which have become known as Basel II. We give a short overview of the Basel II framework and present the different approaches which can be used to determine the amount of regulatory capital needed for equity exposures. These methods vary from simple, rather rule of thumb methods, to more sophisticated and economic-oriented approaches. We compare the regulatory capital consumption of two equity portfolios using the different Basel II-compliant methods. We provide evidence that, as far as regulatory capital consumption for equity exposures is concerned, there is no real incentive for banks to use the more sophisticated and economic-oriented models such as VaR or EVT models.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center Insurance, Leuven

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