The scramble for capital
More questions than answers
Regulators are tightening bank capital rules for trading-book risk. In July, both the Basle Committee and the EU, through its Capital Directives Requirement, published new proposals aimed at curbing excessive risk-taking.
Taken together, the measures include an incremental risk charge (IRC) for certain trading-book risks, the introduction of a stressed value at risk (VaR) model, and new rules on re-securitizations.
All three measures will result in higher capital charges, with banks possibly having to triple the amount of capital that they must hold against their trading-book assets, according to some estimates.
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