Basel II Implementation: A Guide to Developing and Validating a Compliant, Internal Risk Rating System

✍ Scribed by Bogie Ozdemir, Peter Miu

• Publisher: McGraw-Hill
• Year: 2008
• Tongue: English
• Leaves: 355
• Edition: 1
• Category: Library

✦ Synopsis

Many financial institutions around the world must prove minimum compliance to the Basel II Accord by 2015. For several banks, implementing internal risk rating systems (IRRS) is simply Basel II compliance. However, when carried out with a proper focus on bottom-line growth, this regulation has been shown to enhance a bank's risk-management practices and competitiveness in the market. Basel II Implementation is an invaluable guide that puts a potent combination of theory and real-world practice at your fingertips.

Written by two of the most globally recognized and sought-after thought leaders in Basel II implementation, this how-to book maps out, step-by-step, implementable solutions that are both academically credible and practical, making them defendable to regulators and executable within the constraints of data, resources, and time. Organized to sequentially follow IRRS development under Basel II, each section of this go-to guide provides:

• An introduction to the Basel II concept
• A variety of techniques for reaching compliance, based on research conducted by the authors and supported by Standard & Poor's
• Corporate case examples that illustrate implementation in the real world

To complement the holistic approach in Basel II Implementation , which offers end-to-end analysis of various credit risk problems, an accompanying CD-ROM features a wealth of useful spreadsheet templates that will facilitate the efficient and accurate execution of covered techniques.

Stay ahead of the curve with the expert strategies and advice found in Basel II Implementation.

✦ Table of Contents

Contents......Page 9
Acknowledgments......Page 11
Introduction......Page 13
Overview......Page 19
The Use of Credit Risk Assessment Templates in IRRS......Page 20
The Use of Quantitative Models in IRRS......Page 24
The Use of Hybrid Models in IRRS......Page 28
The Use of Retail Models in IRRS......Page 32
The Use of LGD Models in IRRS......Page 34
The Choice of LGD Discount Rate......Page 37
Discount Rate for Workout Recoveries: An Empirical Study......Page 39
Conclusions......Page 81
Overview......Page 83
Risk Rating Philosophy......Page 85
Long-run PD......Page 95
Downturn LGD......Page 114
Downturn EAD......Page 140
Downturn LGD: A Case Study......Page 142
Establishing a Master Scale......Page 152
Stress Testing......Page 156
EAD Estimation......Page 189
Overview......Page 201
Confirmation of the Conceptual Soundness and Initial Risk Quantification of the Design of the IRRS......Page 202
Confirmation of Risk Rating System Operations......Page 218
Annual Examination of the Overall Performance of the Risk Rating System......Page 221
Validation of Mappings between Internal and External Risk Rating Systems......Page 287
Governance......Page 289
Conclusions......Page 296
Introduction......Page 299
Background Definitions......Page 300
Some Pillar II: Implementation Issues......Page 308
Capital Planning and Capital Adequacy Assessment Framework with Respect to Pillar II......Page 314
Conclusions......Page 321
Notes......Page 323
Index......Page 337
C......Page 339
D......Page 340
F......Page 342
I......Page 343
L......Page 344
M......Page 346
P......Page 347
R......Page 348
S......Page 349
U......Page 350
V......Page 351