SunGard issues BCBS proposals paper
01 June 2012 London
Image: Shutterstock
SunGard has released a paper outlining the likely impact of the Basel Committee on Banking Supervision’s (BCBS’s) 3 May proposals to review the market risk framework under which banks calculate their regulatory capital requirements for the trading book.
In the paper, which is entitled Basel Committee on Banking Supervision – 'Fundamental Review of the Trading Book', Mat Newman of SunGard’s Adaptiv and David Renz of SunGard’s Ambit looked at the key proposals.
The paper said that the BCBS has made proposals to: “[R]eview the definition of trading book versus banking book; to change the way risk models are calibrated; to replace VaR with new measures of risk; to incorporate liquidity considerations into market risk; considerations around hedging; and a review of the standardised methods and their relation to internal models.”
The BCBS proposed a tightening of the trading book/banking book boundary. The paper said that this is “to limit regulatory arbitrage as banks could move positions into a classification that provides the most favourable capital outcome”.
It added: “Banks might face higher capital charges as it becomes more difficult to move assets between the trading and banking books.”
The paper goes on to look at the BCBS’s other key proposals, as well as the role that technology can play in meeting regulatory requirements.
In the paper, which is entitled Basel Committee on Banking Supervision – 'Fundamental Review of the Trading Book', Mat Newman of SunGard’s Adaptiv and David Renz of SunGard’s Ambit looked at the key proposals.
The paper said that the BCBS has made proposals to: “[R]eview the definition of trading book versus banking book; to change the way risk models are calibrated; to replace VaR with new measures of risk; to incorporate liquidity considerations into market risk; considerations around hedging; and a review of the standardised methods and their relation to internal models.”
The BCBS proposed a tightening of the trading book/banking book boundary. The paper said that this is “to limit regulatory arbitrage as banks could move positions into a classification that provides the most favourable capital outcome”.
It added: “Banks might face higher capital charges as it becomes more difficult to move assets between the trading and banking books.”
The paper goes on to look at the BCBS’s other key proposals, as well as the role that technology can play in meeting regulatory requirements.
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