The potential effect of the new basel operational risk capital requirements
The three pillars of Basel II introduce new capital ratios, new supervisory procedures, anddemand better disclosure to ensure effective market discipline in both the equity and debtmarkets. Included in these requirements, for the first time, is the necessity for financialinstitutions to provide for operational risk, as distinct from credit and market risk. This isconsidered to be most problematic of Basel II requirements. posing difficulties of definition,implementation, and strategic planning. It will affect product development, investment and assetmix, as well as requiring the rapid development of new risk rating models and techniquestogether with vastly expanded internal and external audit compliance routines. The issues of cost,necessity and difficulties of measuring operational risk are examined in this paper. Apart frommicro effects on bank pricing, macro questions of restriction of credit and distortions in systemsefficiency need to be addressed. Such issues are considered in the context of reasons for bankfailure and the effect on systemic goals of stabiliry and safety.
|Year of publication:||
|Other Persons:||Trayler, R (contributor) ; Docherty, P (contributor) ; Terry, C (contributor)|
University of Technology, Sydney
|Type of publication:||Other|
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