The Fundamental Review of the Trading Book (FRTB) introduces changes in capital requirements as a consequence of changes in the calculation of risk weighted assets (RWAs), as agreed in the Basel Committee on Banking Supervision. This report performs an ex-ante assessment of the potential benefits of this new legislative proposal and is included as an annex to the Impact Assessment of the Capital Requirement Regulation II (CRR II) which was published on 23 November 2016. The analysis is conducted by estimating the required variation in banks’ capital following the implementation of the legislative changes by using econometric and statistical techniques. The estimated capital requirements are then used to feed a simulation model of losses originating from the banking sector in the event of a banking crisis. Results of the crisis simulation before and after the introduction of the legislative changes are compared to arrive at an estimation of the impacts. Benefits are measured as reduction in banks’ losses that need to be absorbed by different stakeholders, starting from shareholders and including the whole loss absorption cascade and financial safety net (i.e. bail-in and resolution funds).
Estimation of potential benefits of the implementation of the fundamental review of the trading book and leverage ratio
DI GIROLAMO, FRANCESCA;ROSSI Eduardo
2016-01-01
Abstract
The Fundamental Review of the Trading Book (FRTB) introduces changes in capital requirements as a consequence of changes in the calculation of risk weighted assets (RWAs), as agreed in the Basel Committee on Banking Supervision. This report performs an ex-ante assessment of the potential benefits of this new legislative proposal and is included as an annex to the Impact Assessment of the Capital Requirement Regulation II (CRR II) which was published on 23 November 2016. The analysis is conducted by estimating the required variation in banks’ capital following the implementation of the legislative changes by using econometric and statistical techniques. The estimated capital requirements are then used to feed a simulation model of losses originating from the banking sector in the event of a banking crisis. Results of the crisis simulation before and after the introduction of the legislative changes are compared to arrive at an estimation of the impacts. Benefits are measured as reduction in banks’ losses that need to be absorbed by different stakeholders, starting from shareholders and including the whole loss absorption cascade and financial safety net (i.e. bail-in and resolution funds).I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
