BCBS: “Trading book quantitative impact study by the Basel Committee”
19 October 2009
Banking Supervision study concludes that changes to the market risk framework will increase average trading book capital requirements by two to three times their current levels, although the Committee noted significant dispersion around this average.
The Basel Committee on Banking Supervision today issued the results of its recent trading book quantitative impact study, which assesses the impact of the revisions to the 1996 rules governing trading book capital. These revisions, which were originally published by the Committee in January 2009, were adopted in July 2009.
Excluding the so-called correlation trading portfolio, the study concludes that the changes to the market risk framework will increase average trading book capital requirements by two to three times their current levels, although the Committee noted significant dispersion around this average. Based on the results of the study, the Committee decided to maintain the original calibration proposed in its January consultative package and adopted in July 2009.
Mr Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank, noted that "increasingly complex trading book exposures were a major driver of losses in the recent crisis". He added: "The reforms will ensure that these exposures are backed by a sufficient capital cushion, help address procyclicality of trading book capital requirements, and limit arbitrage opportunities between the trading book and the banking book."
The Committee will conduct a further impact study to evaluate a floor for the comprehensive risk capital charge for correlation trading portfolios. It will be completed in 2010. The trading book requirements will be implemented no later than 31 December 2010.
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