Why markets do not trust Basel II Internal Ratings-Based Approach: What can be done about it?
Abstract
The Basel capital adequacy standard is in crisis. The cherished goal of a global level playing field has fallen by the wayside, replaced by an over complicated regime that many of the world’s most important banks have not adopted, while those that have are facing outright rebellion from capital markets that no longer trust risk-weighted assets (RWAs). While some of the debate on this topic is superficial and generates more heat than light, the further investors dig into the apparent inconsistencies in RWA calculations the less confident they become. Faced with this, it is argued the Basel Committee has two options — either try and ‘prove’ RWAs work or else dumb it down. The fear is that the committee’s instinct is to focus only on the former, something that might end up with the Basel framework becoming increasingly irrelevant.
The full article is available to subscribers to the journal.
Author's Biography
Simon Samuels is a Managing Director and equity analyst at Barclays, based in London. He heads up the equity research team covering the European bank sector and has responsibility for sector-wide thematic research. He has been analysing the European banking sector since 1992. Simon joined Barclays in 2009 from Citigroup where he held a similar role for 12 years. At Citigroup and now at Barclays his team has been ranked Top 3 in most major surveys for more than a decade. He was the number one ranked bank analyst in Europe in 2011 according to both the Institutional Investor and Thomson Extel surveys. He has been a member of a World Economic Forum group examining deleveraging trends globally and more recently a member of an FSB/BIS task force examining bank financial reporting. Prior to Citigroup, he worked at Dresdner Bank and Merrill Lynch. He qualified as a Chartered Accountant at Price Waterhouse after graduating with an Economics degree from London School of Economics.
Citation
Samuels, Simon (2013, January 1). Why markets do not trust Basel II Internal Ratings-Based Approach: What can be done about it?. In the Journal of Risk Management in Financial Institutions, Volume 6, Issue 1. https://doi.org/10.69554/OCQT4381.
Publications LLP