Industry WIKI

The term Advanced IRB or A-IRB is an abbreviation of advanced internal ratings-based approach, and it refers to a set of credit risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions.

Advanced measurement approach (AMA) is one of three possible operational risk methods that can be used under Basel II by a bank or other financial institution. The other two are the Basic Indicator Approach and the Standardised Approach. The methods (or approaches) increase in sophistication and risk sensitivity with AMA being the most advanced of the three.

The Basel Committee on Banking Supervision (BCBS, often shortened as Basel Committee) is a body that brings together bank supervisory authorities to set common prudential standards and policy. It relies on a permanent secretariat hosted by the Bank for International Settlements in Basel, Switzerland.

Basel I, or the 1988 Basel Accord, is a framework on banking regulations published by the Basel Committee on Banking Supervision in 1988. It arose from deliberations by central banks from major countries during the late 1970s and 1980s. By 1992, it had been transposed into law by all Group of Ten (G10) countries.

Basel II is a framework on banking regulations published by the Basel Committee on Banking Supervision in June 2004 to determine the minimum capital that banks should hold to guard against the financial and operational risks. It superseded Basel I and was extended and partially superseded by Basel III.

Basel III is a framework published by the Basel Committee on Banking Supervision (BCBS) in response to the deficiencies in financial regulation revealed by the 2008 financial crisis. It sets international standards and recommendations for bank capital requirements, stress tests, liquidity regulations, and leverage, with the goal of mitigating the risk of bank runs and bank failures. Base

The Capital Requirements Directives (CRD) for the financial services industry have introduced a supervisory framework in the European Union which reflects the Basel II and Basel III rules on capital measurement and capital standards.

Credit risk is the chance that a borrower does not repay a loan or fulfill a loan obligation. For lenders the risk includes late or lost interest and principal payment, leading to disrupted cash flows and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, me

Exposure at default (EAD) is a parameter used in the calculation of economic capital or regulatory capital under Basel II for a banking institution. It can be defined as the gross exposure under a facility upon default of an obligor.

Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent.

Financial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk - principally credit risk and market risk, with more specific variants as listed aside - as well as some aspects of operational risk. As for risk management more generally, financial risk management requires identifying the sources of risk, measuring these, and crafting

The term Foundation IRB or F-IRB is an abbreviation of foundation internal ratings-based approach, and it refers to a set of credit risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions.

Under the Basel II guidelines, banks are allowed to use their own estimated risk parameters for the purpose of calculating regulatory capital. This is known as the internal ratings-based (IRB) approach to capital requirements for credit risk. Only banks meeting certain minimum conditions, disclosure requirements and approval from their national supervisor are allowed to use this approach

Legal risk as a subset of operational risk that comprises the uncertainty associated with a business becoming a subjects of legal liability and obligations as a result of its operation.

Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility.

Probability of default (PD) is a financial term describing the likelihood of a default over a particular time horizon. It provides an estimate of the likelihood that a borrower will be unable to meet its debt obligations.

The standardized approach for counterparty credit risk (SA-CCR) is the capital requirement framework under Basel III addressing counterparty risk for derivative trades.

The term standardized approach (or standardised approach) refers to a set of credit risk measurement techniques proposed under Basel II, which sets capital adequacy rules for banking institutions.

In the context of operational risk, the standardized approach or standardised approach is a set of operational risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions.