market risk

27 11, 2023

GSE-112723

2023-11-27T11:49:59-05:00November 27th, 2023|4- GSE Activity Report|

An Advanced View of Regulatory Capital?

The most significant thing in FHFA’s final capital rule is not what is to be done, but what FHFA left out: ending the GSEs’ advanced-approach requirement.  As a result, Fannie and Freddie can still use models for key calculations, a requirement that makes more sense for two complex organizations than it did for the regional banks also long subject to advanced-approach requirements even though the rules required them, like GSIBs, to hold the higher of the standardized or advanced approach.

GSE-112723.pdf

16 08, 2023

FedFin on: Market-Risk Capital Standards

2023-08-17T10:02:39-04:00August 16th, 2023|The Vault|

In this analysis, we turn to one of the costliest aspects of the proposed rewrite of U.S. regulatory-capital standards:  the market-risk framework.  This aspect of the proposal would significantly rewrite current U.S. market-risk rules to reflect the “fundamental review of the trading book” (FRTB) regime the Basel Committee crafted in 2018.  However, unlike the global rules, the U.S. approach would largely dispense with reliance on internal models in a manner generally consistent with the overall decision to eschew models; even where models are allowed for market risk, they are strictly constrained.  These standards thus would raise current market risk-based capital (MRBC) requirements by as much as seventy percent, with much of this falling on category I and II banks no longer allowed to use their current, largely models-based methodologies….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

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