What is Pillar 1 and Pillar 2 Basel?

What is Pillar 1 and Pillar 2 Basel?

Basel regulation has evolved to comprise three pillars concerned with minimum capital requirements (Pillar 1), supervisory review (Pillar 2), and market discipline (Pillar 3). Today, the regulation applies to credit risk, market risk, operational risk and liquidity risk.

What is meant by Tier 1 capital?

Tier 1 capital is a bank’s core capital and includes disclosed reserves—that appears on the bank’s financial statements—and equity capital. This money is the funds a bank uses to function on a regular basis and forms the basis of a financial institution’s strength.

What is Pillar II?

The Pillar 2 requirement (P2R) is a bank-specific capital requirement which applies in addition to, and covers risks which are underestimated or not covered by, the minimum capital requirement (known as Pillar 1). A bank’s P2R is determined on the basis of the Supervisory Review and Evaluation Process (SREP).

What is pillar 1 and pillar 2 OECD?

Pillar One provides taxing rights to market jurisdictions on part of the residual profits earned by MNE groups with an annual global turnover exceeding €20 billion and 10 percent profitability. Pillar Two requires MNE groups with an annual global turnover exceeding €750 million to pay at least 15 percent tax.

What is ICAAP 5?

5 ICAAP is a bank’s internal process for assessing its overall capital adequacy in relation to its risk profile and strategy for maintaining their capital levels.

What are the objectives of ICAAP/SREP?

Objectives of ICAAP / SREP Internal Capital Adequacy Assessment Process 5 ICAAP is a bank’s internal process for assessing its overall capital adequacy in relation to its risk profile and strategy for maintaining their capital levels.

What is Pillar 2 in internal capital adequacy assessment?

the overall Pillar 2 rule in Internal Capital Adequacy Assessment 3.1 is based. Common stress scenarios 3.16 As part of its Concurrent Stress Testing framework, 1 the Bank of England publishes a common stress scenarios aimed at assessing the UK banking system’s capital adequacy.

What is the Capital Planning Element of ICAAP?

Capital planningelement is to make the ICAAP a forward-looking process, capable of enabling a bank to make timely responses to changes in risk profile and external environment. Stress testingis a crucial component (“Pillar 2 capital stress test”).