Basel II Insight

In this article, adapted from the original Moody’s Analytics whitepaper, "Loss Reserves are Falling, But They Could Soon Be on the Rise”, Community Banks are offered an analysis of how they can use the Financial Accounting Standards Board’s (FASB) proposed updates to accounting standards in regard to allowance for credit losses (ACL) from December of 2012 to their competitive advantage. The systems and processes that can help banks comply with the new standards can also be leveraged to improve how they do business.  

Author: Christian Henkel & Jan Larsen
Date: April 12, 2013

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Depending on your point of view, regulations can be viewed as a hindrance or a compliance cost. However, hidden in the pending regulations being mandated in the global financial service sector is an opportunity to leverage regulatory investment into business gains. Download this article and discover the ability to leverage the expenditure on data analytics to capture enhanced business value consistently over a longer term. A well-structured data analytics infrastructure could pay for itself in ways more than one.

Author: John Baer
Date: March 21, 2013

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In December 2012, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) released their proposed update to the accounting standards for the Allowance for Credit Losses (“ACL”). The standards are intended to address weaknesses in the prior guidance that were revealed by the financial crisis. Specifically, the guidance seeks to facilitate more timely recognition of likely losses, and also seeks to simplify the prior guidance by establishing a single standard for impairment. In this whitepaper, we argue that the banks who best adapt to the new standards will be at a competitive advantage, and not only because of the edge inherent in setting more accurate provisions. The same systems and processes that can help you comply with the new standards can be leveraged to improve a wide array of core business activities.    

Authors: Christian Henkel, Jan Larsen
Date: February 6, 2013

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The 2007-2008 financial crisis has resulted in a greater focus on risk management from both a quantitative and qualitative perspective. This paper addresses the main issues associated with data quality in banking, demonstrating that data silos continue to be the main cause of data quality issues. The regulatory wave triggered by the financial crisis has not ignored the data-quality issue and this paper outlines the key regulatory concerns, mainly around Basel II and III. Finally, this paper outlines best practices banks can leverage to improve data accuracy, quality, and access across the organization.

Author: Massimiliano Neri
Date: October, 2012

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Pierre-Etienne Chabanel's Presentation from the Moody’s Analytics Regulatory Capital User Group provides an overview of recent regulatory developments covering the current Basel III status and timeline for Europe and the rest of the world, latest EU CRD IV regulation and directive proposals, and EU Unified COREP, FINREP and Large Exposure regulatory reports.

Author: Pierre-Etienne Chabanel
Date: June 13, 2012

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In this section you will find a presentation of the history of the Basel regulations, and how they benefit the industry. Also there is an introduction to credit risk modelling that helps you to understand corporate credit risk and associated financial risk drivers, and a case study using Moody’s RiskCalc that takes a representative sample of Russian firms to asses her wider economic risk factors.

Author: Christian Thun
Date: April 1, 2011

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This slide deck considers the inherently fluid nature of credit quality, and how assessing credit must be continually monitored and actively managed, in particular when determining the extent of exposures or measuring assets in a portfolio. The importance of high quality stress testing is higher than ever as organisations now understand diversification is a risk and that investment strategies must be competently tested too.

Author: Christian Thun
Date: April 1, 2011

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The Basel II document was originally published in 2004 with the objective of creating standards and regulations around how much capital banks must hold. The regulation is divided into three pillars concerned with minimum capital requirements, supervisory review and market discipline. Read on for more information.

Author: Sandrine Prioux
Date: March 11, 2011

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Most of the global banking and insurance regulations have been initiated or inspired by the work of the Basel Committee on Banking Supervision and its so-called “Basel regulations”. Read this article to understand what the Basel Committee is, what it aims to achieve, and its impact on the regulations your clients and prospects have to comply with today.

Author: Sandrine Prioux
Date: March 11, 2011

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New compliance issues are centred on measuring credit risk and calculating capital adequacy ratios. This is achieved through the standardised approach and an internal ratings approach. Read on for more information.

Author: Sandrine Prioux
Date: March 11, 2011

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Pillar 2 of the Basel II framework is concerned with banks’ internal capital assessment and allowing efficient regulatory supervision. To comply with Pillar 2, banks are required to undertake an Internal Capital Adequacy Process or ICAAP. Read on for more information.

Author: Sandrine Prioux
Date: March 11, 2011

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In April 2008, the Basel Committee on Banking Supervision (BCBS) announced a series of changes to the Basel II framework as an immediate response to the financial crisis. What are the key requirements?

Author: Sandrine Prioux
Date: March 11, 2011

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This slide presentation provides some historical perspective on approaches to PG/LGD model development and the operational risks inherent in building and using these models. It also focuses on the tools available to manage the risks associated with PD/LGD modelling, such as a lack of data. Moody’s techniques for dealing with Low Default Portfolios are presented alongside an explanation of how LGD is measured.

Author: Jason Kofman
Date: February 1, 2011

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This presentation by Christian Thun, Risk Practice Leader EMEA, Moody’s Analytics offers an insight into the new sets of challenges faced by the banking industry and other financial institutions following the financial crisis. In 2008 financial institutions defaulted on almost $223 billion, more than 15 times the default volume in 2001 and almost 70 times greater than the 1991 volume. Why was this and could stress testing have helped plug the holes that led to collapse?

Author: Christian Thun 
Date: January 18, 2011

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A presentation focusing on what Enterprise Risk and Performance Management (ERPM) is and why it is necessary. We show you why it is highly necessary in the current post downturn environment and required by the regulator, by shareholders, investors and by your management. Volatile markets call for systematic analysis of expected return vs risks and ERPM is the way to achieve this at an industrial scale as it can bring long term strategic value.

Author: Gil Guillaumey
Date: October 13, 2010

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Amnon Levy, Managing Director, Head of Portfolio Research, Moody’s Analytics looks at the importance of understanding and managing liquidity funding in light of the credit crunch. Nowadays the banks’ funding liquidity costs have a greater bearing on Funds Transfer Pricing (FTP) because credit ratings of banks have deteriorated, leading to a sharp increase in funds. The challenge is for financial institutions to assign an FTP to each instrument on an enterprise wide basis and to break it down into different components that can be translated into actionable measures.

Author: Amnon Levy 
Date: April 2010

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The risks associated with incorrectly measuring liquidity exposure are at an all time high. Many businesses took their eye of the ball when times were good, and as a result now have heavy debt loads. Governments too understand the need to encourage liquidity through financial markets and have taken steps to increase its flow. In this article the case is made for a return to asset based liquidity strategies that use available funds, and not through the sale of receivables. However it is likely that regulation and behaviour will determine how and if this can be achieved.

Author: Alain Maure
Date: February 2010

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This article from August 2009 centres on Moody’s liquidity management compliance solution, which combines software and professional services, and is built with both regulatory requirements and broader risk management challenges in mind. It offers a range of benefits spanning data collection, stress simulation, regulatory calculations, and group-wide enhanced liquidity management. It also looks at the perceived challenges for UK institutions at that time.

Author: Nicolas Kunghehian
Date: August 11, 2009

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Risk analysis, or the lack thereof, has brought many of the biggest and supposedly ‘too big to fail’ banks to their knees. In this report, Dr Christian Thun gets to grips with the nuts and bolts of internal risk management and suggests new approaches to an age old problem. He argues for an internal ratings tool that can support all credit risk activities and underlines how such a tool can bring a number of advantages to an organisation, including profitability.

Author: Christian Thun
Date: February 2009

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