The consultation paper provides an overview of the range of practices in economic capital modelling at large banking organisations and discusses a range of issues and challenges surrounding economic capital models.
The consultation paper provides an overview of the range of practices in economic capital modelling at large banking organisations and discusses a range of issues and challenges surrounding economic capital models.
The paper also discusses practices implemented by banks that attempt to address these challenges and reviews supervisory concerns relating to the current state of practice.
It is addressed to banks that have implemented or are considering implementing economic capital into their internal processes. The paper is also addressed to supervisors, who are required under Pillar 2 of the Basel II Framework, to review and evaluate banks' internal capital adequacy assessments.
The paper sets out ten recommendations ranging from the use of capital models to issues related to the choice of risk measures, aggregation of risk, and validation of economic capital.
Deadline for comments is 28 November 2008.
Press release
Consultation paper: Range of practices and issues in economic capital modelling
© BIS - Bank for International Settlements
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