What is market risk as per Basel norms?

What is market risk as per Basel norms?

“Market risk: the risk of losses arising from movements in market prices.” Following up on the Basel 2.5 framework, the Committee initiated a fundamental review of the trading book regime.

What are the four main focus of Basel 2 Accord?

Basel II included new regulatory additions and was centered around improving three key issues – minimum capital requirements, supervisory mechanisms and transparency, and market discipline. Basel II created a more comprehensive risk management. It is usually done with framework.

What are Pillar 2 risks?

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 the SREP?

This activity is called the Supervisory Review and Evaluation Process, or SREP, and its purpose is to allow banks’ risk profiles to be assessed consistently and decisions about necessary supervisory measures to be taken.

What is market risk PDF?

Market risk can be defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from adverse movements in market prices.

What is RWA for market risk?

Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other financial institutions in order to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of bank asset.

What is Basel II operational risk?

Definition. The Basel Committee defines operational risk in Basel II and Basel III as: The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk.