A Capital Accord for Emerging Economies?. Andrew Powell Universidad Torcuato Di Tella and Visiting Research Fellow, The World Bank (Financial Sector Strategy and Policy - FSP) July, 2001. Motivation. BCBS has published a proposal to change the 1988 Capital Accord
A Capital Accord for Emerging Economies?
Universidad Torcuato Di Tella and
Visiting Research Fellow, The World Bank
(Financial Sector Strategy and Policy - FSP)
The Standardised Approach
BRW = Benchmark risk weight, N(.) is cumulative normal, G(.) is the inverse cumulative normal, PD is probability of default and LGD is Loss Given Default. Subsequent adjustments may then be made for maturity and ‘granularity’.
Source: author’s calculations based on S&P ratings and BIS consolidated claims on developing economies and some strong assumptions!
Given the uncertainty of applying the corporate-calibrated, IRB approach to sovereigns, this would create a less controversial and less convex scale.
Likely result: will ‘implement’ the standardised approach and little will change (execpt enhanced rules on collateral and other supporting documents – Pillars 2 and 3 etc.)