25 Aug Basel III Capital Charges
Mikey’s hard at work.
I’m glad we have our best man on the job! With little Mikey (see picture) hard at work, why worry?
Basel III & Capital Charges
Basel III levied a 2% capital charge for cleared derivatives. Uncleared derivatives will incur a risk weighting of 2-5%. There will be a capital charge for those banks with direct exposure to a clearinghouses default fund. The default fund is the money each clearing member sets aside to cover losses in the event a clearing member has a client default.
The Basel III Committee’s guidelines can be read here.
The Impact of Basel III & Capital Charges
Ernst & Young published a report “Progress in Financial Services Risk Management”. The report is a detailed view of all aspects affecting the financial service industry’s cost structure including Basel III. The entire report can be read here. The Impact of Basel III can be found on Page 48.