Kick-off new Focus Group on “Bank-internal Economic Risk and Performance Measurement within Basel 2 – Pillar 2”
Member discussion group by web/phone, plus breakout sessions in conferences. GCD focus groups are run by members and cover topics of interest to members, so the focus may move during the discussions. Chaired by: Robbin Tops and Raphael Keller of UBS have offered to chair the focus group Content: All Financial institutions need to measure the risks that the institution is running. • Regulators require quite rigid risk measurement through Basel Pillar 1 models and stress tests (CCAR in the US) • CFOs and auditors require expected loss modelling in accordance with their rules of IFRS9 and CECL However the bank needs to have their own view on risk, an internal risk assessment is usually measured using an economic view. For Basel purposes, these models are run as an alternative internal measure of performance and required capital. This process is described within Pillar 2 of the Basel Accord Economic Capital modelling gives the Board and Management a tool to steer the business and their particular risk mix (risk they deem material) and ensure that the bank has sufficient capital and earnings cushions to cover future downturns. All aspects of internal risk measurement within Pillar 2 will be open for discussion, […]
