CARDS-LGD-ND AIRB

Question 1

TERMS-
-AIRB
-EAD
-EL
-CRS
-LGD
- OSFI
-RMA
-RC
-SoU
-UL
-D-SIDs

Answer 1

-AIRB - Advanced Internal Rated Based (approach)
-EAD - Exposure at Default
-EL - Expected Loss
-CRS - Credit Risk System
-LGD - Loss Given Default
- OSFI - The Office
-RWA - Risk Weighted Assets
-RC - Regulatory Capital
-SoU - Sources of Uncertainty
-UL - unexpected Loss
-D-SIBs - Domestic Systematically Important Banks (A bank that it failure could significantly disrupt the entire financial system)

Question 2

What is the 3 Framework?

Answer 2

The Pillar 3 Framework purpose is to encourage market discipline by ensuring that banks provide meaningful and comprehensive disclosure about their risks and capital adequacy.

Question 3

What is the Basel Framework

Answer 3

The Basel Framework is the full set of standards developed by the Basel Committee on Banking Supervision (BCBS). As the primary global setter for the prudential regulation of banks , the BCBS ensures that these standards apply to internationally active banks across various jurisdictions.

Question 4

What is the Pillar 3 Framework?

Answer 4

The primary goal is to encourage market discipline by ensuring that banks provide meaningful disclosure about their key risks and capital adequacy. It outlines a set of public disclosure requirements.

These requirements aim to public disclosure requirements. These requirements aim to provide market participants (such as investors, regulators, and the public) with sufficient information to access the material risks faced by internationally active banks and evaluate their capital adequancy.

Question 5

What is the Pillar 1 of the Pillar 3 Framework?

Answer 5

Minimum Capital Requirements - Pillar 1 establishes the minimum amount of regulatory capital that banks must hold to cover their risk.

Impact: Ensures banks have a buffer against unexpected losses.

Question 6

What is Pillar 2 of the Pillar 3 Framework?

Answer 6

Supervisory Review Process (SREP) - Pillar 2 involves a supervisory review by regulators to assess additional risks not fully captured by Pillar 1.

Regulators evaluate banks’ risk profiles, governance, risk management, and stress testing.

Capital Add-ons: If necessary, regulators impose additional capital requirements beyond Pillar 1.

Impact: Enhances risk sensitivity and tailors capital requirements to individual banks.

Question 7

What is Pillar 3 of the Pillar 3 Framework?

Answer 7

Market Discipline and Disclosure - Pillar 3 promotes transparency by requiring banks to disclose relevant information to market participants

Key disclosures:
-Quantitative Disclosures: Details on capital adequacy, risk exposures, and risk-weighted assets.
-Quantitative Disclosures: Details on capital adequacy, risk exposures, and risk-weighted assets.
Impact: Enables investors, analysts, and the public to assess a bank’s risk profile and make informed decisions