Basel II's New Standardized Approach: Possible Effects of Implementation
Basel II’s New Standardized Approach: Possible Effects of Implementation Katherine Wyatt New York State Banking Department Abstract The New York State Banking Department surveyed 33 institutions in 2001 and 2002 for a study of the possible effects of the Standardized Approach of the proposed New Capital Accord. Previously, the BIS Quantitative Impact Studies have focused on internationally active banks; this study provides information on the possible impact of the New Accord on domestic banks with asset size between $1 billion and $40 billion. These institutions are often grouped with community banks. The Department found that implementation of the most recent version of the Standardized Approach could lead to an average decrease of 7% in required capital for credit risk, but adding the proposed operational risk charge could bring the total capital charge on average to an increase of 12%. In addition, the estimated impact of the New Standardized Approach varies widely across institutions in the study: the change in minimum capital required for credit risk ranges from a decrease of 23% to an increase of 6%. The Basic Indicator charge for operational risk ranges from 5% of minimum regulatory capital for one savings bank to 83% of minimum required capital for a specialty bank. In this paper, we present a breakdown of the effects of the various elements of the proposed Standardized Approach, and consider a modified approach. We also analyze Call Report data for the survey banks to determine their “complexity profile” and review possible changes to their capital ratios.
Basel II, External Ratings and Adverse Selection
This paper will describe and analyse the development of Basel II Capital Accord and will focus on the use of external ratings in the Standardized Approach in Basel II. Furthermore it will examine the problem of adverse selection which appears in Basel II as a result from the proposal for the use of external ratings in determining the risk weights in the standardized approach. The paper will also attempt to find possible solutions to the adverse selection problem by discussing two similar models, and derive implications from them.
Creating the Virtual Universe
Simulation software is important to our understanding of the universe. The intrinsic multiphysics aspects are spiced with a range of temporal scales and spatial scales, both of which cover more digits than are available in the standard hardware. This, together with the intrinsic chaotic nature of many physical processes, poses quite a challenge. To meet this challenge, researchers developed the Astronomical Multipurpose Environment (AMUSE). Instead of writing a suite of multiphysics solvers from scratch, AMUSE's developers coupled existing solvers for each physical ingredient. The result is a highly inhomogeneous collection of dedicated solvers with a homogeneous protocol that scales to supercomputers.