Part 2 Section D.1.5. Risk Measurement in Banks　銀行のリスク評価指標

Risk Measurement in Banks

• Capital adequacy
• The Basel Committee on Banking Supervision
  • introduced a capital measurement system called Accord of 1998.
  • Since 1998, the Basel Accord has been replaced with more complex capital adequacy measurement system known as Basel II
  • Basel III is going to work alongside Basel I and Basel II, but the details are outside the scope
• Basel Accord
• Tier 1 capital: the bank’s core capital
  • common stock
  • retained earnings
  • perpetual preferred stock (if it is non-redeemable and non-cumulative)
• Tier 2 capital: secondary capital
  • undisclosed reserves
  • revaluation reserves (increase in the value of an asset that has been reappraised)
  • general provisions
  • general loan-loss reserves
  • hybrid debt capital instruments that combined characteristics of equity and debt
  • subordinated term debt (debt that would be paid off in the event of default only after some other debt has been paid off)
• Capital Adequacy Ratio (CAR)
  • The amount of capital a bank has is used to calculate each bank’s Capital Adequacy Ratio (CAR).
  • Risk Weighted Assets (RWA) is an adjusted total assets figure that recognizes that the different assets held by banks have different risk profiles.
    • Risk weighing allows banks to adjust their total assets for purposes of calculating their CAR by “discounting” assets that are less risky.

Where:
CAR = Capital Adequacy Ratio
RWA = Risk Weighted Assets