The Revised Standardised Approach. October 19, 2015 Caio Ferreira

Transcription

1 The Revised Standardised Approach October 19, 2015 Caio Ferreira

2 Regulatory Reform: Basel Committee (3Q): 79 Standards 52 Guidelines 15 Sound Practices 40 Implementation reports 37 Others 2

3 Capital Framework Basel III CAR = K RWA Under Discussion 3

4 RWA Inconsistency - BB 4 Source: Basel Committee. Regulatory Consistency Assessment Programme. Analysis of risk-weighted assets for credit risk in the banking book. July 2013

5 RWA Inconsistency - TB 5 Source: Basel Committee. Regulatory Consistency Assessment Programme. Second report on risk-weighted assets for market risk in the trading book. December 2013

6 Sensitivity, simplicity and comparability: Sensitivity Incentives Financial Innovation Comparability Confidence in RWA Simplicity Enforcement Market discipline 6

7 RWA Approaches Pillar 1 Charges Internal Models Standardized Credit risk FAIRB AIRB Cred. Standardized Market risk IMM Market Standardized Operational risk AMA BIA TFSA / ASA 7

8 8 Revisions underway:

9 Why to revised SA? Basel I Basel II 0% 10%20% 100% RW Risk Sensitivity 50% 80%100% 30% 40% 300% 900% 9

10 Why to revised SA? Corporate Exposures (current framework) Credit Assessment AAA to AA- A+ to A- BBB+ to BB- Bellow BB- Unrated Risk Weight 20% 50% 100% 150% 100% - Risk sensitive? 10

11 Why to revised SA? 11 Lack of risk sensitivity Granularity Unrated exposures Excessive use of ratings mechanistic reliance unrated exposures Miscalibration Out-of-date relative terms Complexity lack of clarity number of approaches

12 Key Design Questions What s the Scope? What kind of model? What does standardized mean? Global framework? 12 Wider range of banks No substitute for CRA or IRB limited subjectivity Avoid regulatory fragmentation

13 13 Road Map

14 Sovereigns - not in the scope PSE not in the scope 14 -National discretion: - PSE as sovereign 0% own sovereign

15 Banks - Short term: 20 pp lower (subject to 30% floor) 15

16 Banks - Policy Issues Investment Banks Non Basel III countries Country risk 16

17 Corporates 17 -Specialised Lending - PF, OF, CF, IPRE : 120% - ADC: 150% - Equity / Subordinated debt : 300% or 400%

18 Corporates - Policy Issues Very diverse class - low explanatory power - risk drivers should be different SMEs penalization Specialized lending too punitive 18

19 Residencial Real Estate 19

20 RRE- Policy Issues Risk drivers thresholds Country specific? Pro-ciclicality Monitoring? 20

21 Comercial Real Estate Option A : -No mitigant - 50% under conservative circumstances Option B: 21

22 CRE - Policy Issues collateral might increase risk weight 22

23 Retail Risk weight 75% - Relevant asset class? - Appropriate risk drivers? Objective Criteria - Exposure size: EUR $ 1 MM - Diversification: 0,2% 23

24 OFF Balance Exposures 24

25 Credit Risk Mitigation 25

26 Other Policy issues: Use of ratings - No mechanistic reliance - Limited role? Calibration - current levels? 26

27 Country Implications Markets are different Certainly a lot of room for improvement - risk sensitivity - economic reality Calibration issues 27

28 Country Implications What is the best course of action for jurisdictions that have not implemented BII? - Case by case cost benefits analysis 28

29 Basel II Implementation Benefits Better capitalization? Risk sensitivity? Risk Management? Alignment with International Standards? 29 Implementation costs Substantial for Banks and supervisors. - Particularly for Mkt risk

30 Country Implications BIII benefits are more tangible Stronger definition of capital Liquidity requirement Macro dimension (buffers / SIBs) Most BIII features are independent from BII 30 Some may be hard to implement Need granular information (LCR) Institutional development (CCB)

31 Country Implications 31 If not advanced in the process Postpone BII standardized implementation Prioritize: - BIII definition of Capital; - DSIBs surcharge; -New PIII disclosure requirements; Depending on the stage of development - LCR (or a simplified version) - CCB - PII surcharges

32 Thank You! 32