BCBS 57

From Open Risk Manual

Definition

BCBS 57 is a document published by the Basel Committee on Banking Supervision on October 1999 in the Market Risk category.

Title

Performance of Models-Based Capital Charges for Market Risk: 1 July-31 December 1998.

Abstract

With the implementation of the Basel Committee's Market Risk Amendment to the Capital Accord in 1998, an institution with significant trading activity must now calculate a capital charge for market risk using either its own internal risk measurement model (the "internal models approach") or a "standardised" process developed by the Committee. In order to assess the adequacy of capital charges based on the internal models approach, the Models Task Force conducted a survey analysing over 40 banks, located in 9 countries, that were subject to the requirements set forward in the Amendment. The survey covers the third and fourth quarters of 1998, a period of high market volatility. The evidence gathered is anecdotal in nature and is based on a fairly short time period; consequently the survey does not permit strong conclusions to be drawn concerning the robustness of the models. Nevertheless, it should be noted that the capital charge under the internal models approach provided an adequate buffer against trading loss at these institutions during this period. Looking forward, the Models Task Force believes that banks that use the internal models approach should continue to reassess the performance of these models, and continue to complement them by a robust stress-testing program, in line with the requirements of the Amendment.

Document Profile

  • Publication Date: October 1999
  • Publication Type: Sound Practices
  • Publication Status: Superseded
  • Publication Category: Market Risk
  • Number of Pages: 4
  • Keywords: Market Risk

See Also

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