This shows that the new agreement takes into account the current situation of banking development and has a certain coverage.
Overall, the new agreement embodies the following main features:
1. Break through the traditional banking restrictions.
The new agreement itself considers the merger of different institutions under the holding company. In terms of products, it covers the capital requirements of securitized assets and securities held by banks. At the same time, the Basel Committee also began to promote cooperation with insurance regulators to further promote the formulation of new rules.
The new agreement expands the application scope of the classic minimum capital ratio in terms of institutions and business types, and lays an important policy foundation for the formation of consolidated supervision of the financial industry under the overall development environment of the banking industry.
2. More flexible and dynamic rules.
The new agreement allows banks to implement the internal rating method, which makes the new regulatory rules flexible and helps to absorb various advanced experiences of modern large banks in managing risks.
In order to encourage the updating of the capital requirement method established in the first pillar, the new accord encourages banks to continuously improve their risk assessment methods and develop more complex risk assessment systems.
At the same time, banks are also encouraged to adopt advanced internal rating methods with sufficient data.
The new agreement is conducive to promoting the technological progress of modern bank risk management.
3. Pay attention to the combination of qualitative and quantitative, and the quantitative aspect is more detailed.
The new agreement constructs a new policy framework with three pillars, and emphasizes the necessity of the coordinated development of the three pillars, that is, the combination of quantitative (capital calculation) and qualitative (requirements for the use of regulatory processes, bank management systems and market restraint rules).
As we all know, the quantitative calculation of capital is very important, but due to the difficulty in obtaining data, some risks are difficult to measure, so it is impossible to fully quantify.
Therefore, system construction and process control are very important supplements.
The new regulations also emphasize the quantitative and qualitative requirements for information disclosure.
Compared with the policy framework of 1988, the quantitative calculation of the new agreement is more detailed.
For example, IRB method uses the borrower's default probability (PD), specific default loss (LGD), default exposure (EAD) and other variables in risk estimation, and considers the correlation of various risks in the risk merger of banks, and introduces more complex nonlinear relations into the risk measurement of banks, which is undoubtedly more in line with the actual situation.
The new agreement will have an extremely important impact on international banking supervision and the operation mode of many banks.
First of all, it should be pointed out that the three elements of the New Accord (capital adequacy ratio, supervision and inspection by regulatory authorities and market discipline) represent the development trend and direction of capital supervision.
Practice has proved that the capital adequacy ratio alone cannot guarantee the stability of a single bank or even the entire banking system.
Since the advent of 1988 Capital Accord, the regulatory authorities in some countries have used these three means to strengthen capital supervision at the same time, so as to achieve the goal of stable operation of banks.
However, organically combining the three elements and fixing them in the form of regulatory provisions is undoubtedly an affirmation of successful regulatory experience and a major breakthrough in the field of capital supervision, which needs to be seriously implemented by the regulatory authorities.
Different from the 1988 Capital Accord, the Basel Committee hoped from the beginning that the scope of application of the new accord would not be limited to G- 10 countries, although its focus was still on "internationally active banks" in various countries.
The Basel Committee pointed out that the basic principles of the New Capital Accord are generally applicable to all banks in the world, and it is expected that many banks in non-G- 10 countries will use the standard method to calculate the minimum capital requirements.
In addition, the Basel Committee also hopes that after a period of time, all the big banks in the world can abide by the new accord.
Objectively speaking, once the new accord is issued, participants in the international financial market are likely to use the new accord to analyze the capital status of banks in various countries, and relevant international organizations will also use the new accord as a new international standard for banking supervision, assist the Basel Committee in promoting the new accord on a global scale, and check its implementation.
Therefore, developing countries need to carefully study the impact of the new agreement.
Compared with the 1988 New Capital Accord, the content of the New Capital Accord is more extensive and complex.
This is because the new agreement tries to closely combine the capital adequacy ratio with the main risks faced by banks, and tries to reflect the latest changes in bank risk management and supervision practices, so as to provide as many choices as possible for banks and bank supervision systems at different levels of development.
It should be said that the complexity of the banking supervision system is completely determined by the complexity of the banking system itself.
Banks in the G-10 countries will implement the new agreement within the specified time.
In order to ensure their position in international competition, non-G 10 countries will also strive to fully implement the new agreement within the specified time.
Compared with developed countries, there is a big gap between market development and supervision level in developing countries, so the difficulty of implementing the new agreement cannot be underestimated.
It must also be pointed out here that as far as the scheme is concerned, the new agreement is firstly an agreement between G- 10 countries, and the national conditions of developing countries are not fully considered.
The new capital accord puts forward two methods to deal with credit risk: standard method and internal rating method.
The standard method is based on the 1988 Capital Accord, and external rating agencies are used to determine the risk weight, targeting banks with low complexity.
The use of external rating agencies should be said to be more objective and reflect the actual risk level than the original classification method based on OECD countries.
However, for the vast number of developing countries, including China, the objective conditions for applying this law to a considerable extent do not exist.
There are few domestic rating companies in developing countries, and it is difficult to meet internationally recognized standards; The number of banks and enterprises rated is limited; The rating cost is high, and the results are not necessarily objective and reliable.
If the standard method is rigidly applied, the rating of most enterprises will be lower than BBB, and the risk weight will be 100%, or even150% (enterprises below bb-).
Enterprises will not be motivated to participate in rating, because the risk weight of unrated enterprises is only 100%.
In addition, due to the improvement of risk weight and the introduction of operational risk capital requirements, adopting this method will naturally generally improve the capital level of banks.
Applying IRB to capital supervision is the core content of the New Capital Accord.
This method inherits the innovation of 1996 market risk supplementary agreement, and allows the use of its own internal measurement data to determine capital requirements.
There are two forms of internal rating method, primary method and advanced method.
The first-level method only requires banks to calculate the borrower's default probability, and other risk factors are determined by the regulatory authorities.
Advanced rules allow banks to use multiple risk factor values calculated by themselves.
In order to promote the use of IRB, the Basel Committee has arranged a three-year transition period for banks adopting IRB since 2004.
First, it should be said that the new Basel Accord is a further improvement of the old Basel Accord.
It fully considers all kinds of risks that banks may face; It has strong flexibility, mainly reflected in the method of judging asset risk, which provides banks with a variety of choices; In addition, the requirement of information disclosure will also make banks more transparent to the public.
Second, the New Basel Accord also has some shortcomings.
I. * * * Risk Issues+Although the status of national standards has declined, it still plays a role in the asset selection of banks, and its potential influence cannot be underestimated.
The second is the issue of risk weight.
If the indicators are determined by the regulatory authorities, it is difficult to fully guarantee the objectivity, fairness and scientificity of the authoritative departments in selecting indicators. If banks decide on their own, such problems also exist around the world.
Third, the applicability of measurement methods: the new agreement encourages banks to use measurement methods based on internal ratings. However, there are only a few large banks with long-term operating records, abundant data and strong technical force to process these data efficiently, and most banks are still unable to get rid of their dependence on external ratings and indicators suggested by the authorities.
Fourth, the regulatory targets are mainly commercial banks. However, under the general trend of financial internationalization, bank department stores are constantly emerging, and non-bank financial institutions and non-bank financial services are constantly rising. In this regard, the role of the new agreement will be very limited.
IRB adopts the same risk-weighted asset calculation method for * * *, bank and company risk exposure.
This method relies on four aspects of data. One is the probability of default (PD), that is, the possibility that the borrower defaults in a specific period; The second is the loss given default (LGD), that is, the degree of loss of risk exposure at the time of default; The third is the risk of default (EAD), that is, the loan amount that may be recovered in the case of default; The fourth is the maturity date (M), that is, the remaining economic maturity date of a certain risk exposure.
After considering four parameters at the same time, the company's risk weight function specifies the specific capital requirements of each risk exposure.
In addition, for SME loans with annual sales below 50 million euros, banks can adjust the IRB risk weight formula of the company according to the enterprise scale.
The main difference between IRB advanced method and primary method lies in the data requirements. The former needs the bank's own estimate, while the latter needs the data determined by the regulatory authorities.
The following table shows the differences in this respect:
Main methods of data IRB IRB advanced methods
The estimated default probability (PD) provided by the bank.
Regulatory indicators stipulated by loss given default (LGD) Committee and estimated values provided by banks.
Regulatory indicators specified by EAD Committee and estimated values provided by banks.
Time limit set by the Committee (m) regulatory indicators or
It is up to the national regulatory authorities to decide whether to allow the use of estimates provided by banks (but not including some risk exposures).
The above table shows that all banks adopting IRB must provide internal estimates of the default probability of the company, * * and the bank's risk exposure.
In addition, banks adopting IRB advanced method must provide internal estimates of LGD and EAD, while banks adopting IRB primary method will adopt the indicators specified by the regulatory authorities in the third draft after considering the risk exposure attributes.
Generally speaking, banks adopting IRB advanced method should provide the estimated residual duration of the above risks, but it is not excluded that in some cases, the regulatory authorities may allow the adoption of fixed duration assumption.
For banks that adopt the IRB-1 approach, national regulatory authorities can decide for themselves whether all domestic banks adopt the fixed-term assumption stipulated in the third draft, or whether the banks themselves provide the estimated remaining term.
Another important content of IRB is the treatment of credit risk mitigation tools (namely mortgage, guarantee and credit derivatives).
The internal rating method itself, especially the LGD parameter, provides enough flexibility for evaluating the potential value of credit risk mitigation tools.
Therefore, for banks adopting IRB-1 approach, the different LGD values stipulated by the regulatory authorities in the third draft reflect the existence of different types of collateral.
When evaluating the value of different types of collateral, banks adopting IRB advanced method have greater flexibility.
For transactions involving financial collateral, IRB method strives to ensure that banks use recognized methods to assess risks, because the value of collateral will change.
The third draft provides a clear set of standards for this.
For retail risk exposure, only IRB advanced method can be used, not IRB primary method.
The main data of IRB retail risk exposure formula are PD, LGD and EAD, all of which are estimated values provided by banks.
Compared with the IRB method of enterprise risk exposure, there is no need to calculate a single risk exposure, but an estimated value similar to the risk exposure package is needed.
Considering that all kinds of products contained in retail risk exposure show different historical losses, retail risk exposure is divided into three categories here.
First, the risk exposure of housing mortgage loan guarantee, second, qualified circular retail risk exposure (QRRE), third, other non-housing mortgage loans, also known as other retail risk exposure.
Generally speaking, QRRE includes all kinds of unsecured retail exposures with specific loss characteristics, including all kinds of credit cards.
All other loans for non-housing consumption, including loans for small businesses, are listed under other retail exposures.
The third draft stipulates different risk weight formulas for these three types of businesses.
Professional loan
The new Basel Accord subdivides wholesale loans into loans different from those of other companies, which are collectively called professional loans.
Professional loan refers to the financing provided by a single project, and its repayment is closely related to the operation of the corresponding asset pool or collateral.
For other professional loans except one, if the bank can meet the minimum requirements for estimating relevant data, IRB method can be used to calculate the risk weight of such risk exposure.
However, there are still many difficulties in meeting these requirements in practice, and the third draft also requires banks to subdivide such risk exposure into five levels.
The third draft provides a clear risk weight for each document.
For a specific kind of professional loans, namely "high-volatility commercial real estate" (HVCRE), IRB banks with the ability to estimate the required data will adopt a single formula.
Because of the high risk of such loans, this formula is more conservative than the general corporate loan risk weight formula.
For banks that cannot estimate the required data, Coco can subdivide HVCRE risk exposure into five categories.
The third draft clearly stipulates the risk weight of each document.
(equity risk)
IRB banks need to deal with equity risk exposure separately.
The third draft stipulates two ways.
The first method, based on the default probability and LGD of corporate loans, requires banks to provide the estimated value of relevant equity risk exposure.
However, the LGD stipulated in this method is 90%, and other restrictions are also stipulated, including the lowest risk weight 100% in many cases.
The second method aims to encourage banks to build a model to predict that the market value of their shares may fall in a quarter.
This paper also provides a simple method, including the fixed risk weight of equity of listed companies and non-listed companies.