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The New Basel Capital Accord and Questions for Research

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Author Info
Marc Saidenberg
Til Schuermann
May

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Abstract

The New Basel Accord for bank capital regulation is designed to better align regulatory capital to the underlying risks by encouraging better and more systematic risk management practices, especially in the area of credit risk. We provide an overview of the objectives, analytical foundations and main features of the Accord and then open the door to some research questions provoked by the Accord. We see these questions falling into three groups: what is the impact of the proposal on the global banking system through possible changes in bank behavior; a set of issues around risk analytics such as model validation, correlations and portfolio aggregation, operational risk metrics and relevant summary statistics of a bank’s risk profile; issues brought about by Pillar 2 (supervisory review) and Pillar 3 (public disclosure).

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Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its series Center for Financial Institutions Working Papers with number 03-14.

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Handle: RePEc:wop:pennin:03-14

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Related research
Keywords: Bank capital regulation; risk management; credit risk; operational risk;

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998. "Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-081, New York University, Leonard N. Stern School of Business-.
    Other versions:
  2. Gordon Gemmill, 2002. "Testing Merton's Model for Credit Spreads on Zero-Coupon Bonds," Working Papers wp02-08, Warwick Business School, Financial Econometrics Research Centre. [Downloadable!]
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  6. Jeremy Berkowitz & James O'Brien, 2002. "How Accurate Are Value-at-Risk Models at Commercial Banks?," Journal of Finance, American Finance Association, vol. 57(3), pages 1093-1111, 06. [Downloadable!] (restricted)
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  8. Anil Bangia & Francis X. Diebold & Til Schuermann, 2000. "Ratings Migration and the Business Cycle, With Application to Credit Portfolio Stress Testing," Center for Financial Institutions Working Papers 00-26, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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  9. Lando, David & Skodeberg, Torben M., 2002. "Analyzing rating transitions and rating drift with continuous observations," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 423-444, March. [Downloadable!] (restricted)
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  17. Lopez, Jose A. & Saidenberg, Marc R., 2000. "Evaluating credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 151-165, January. [Downloadable!] (restricted)
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  19. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May. [Downloadable!] (restricted)
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  20. Arturo Estrella, 1998. "Formulas or supervision? Remarks on the future of regulatory capital," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 191-200. [Downloadable!]
  21. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ojo, Marianne, 2008. "Risk Management by the Basel Committee: Evaluating Progress made from the 1988 Basel Accord to Recent Developments," MPRA Paper 10051, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Loriana Pelizzon & Stephen Schaefer, 2005. "Pillar 1 vs. Pillar 2 Under Risk Management," NBER Working Papers 11666, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Jean-Charles Rochet, 2004. "Rebalancing the three pillars of Basel II," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 7-21. [Downloadable!]
  4. Rochet, Jean-Charles, 2003. "Rebalancing the 3 Pillars of Basel 2," IDEI Working Papers 224, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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