Capital Allocation and Bank Management Based on the Quantification of Credit Risk

Nishiguchi, Kenji, Kawai, Hiroshi, Sazaki, Takanori, Federal Reserve Bank of New York Economic Policy Review

1. THE NEED FOR QUANTIFICATION OF CREDIT RISK

Liberalization and deregulation have recently accelerated. It is therefore useful to keep risk within a certain level in relation to capital, considering that financial institutions must control their risk appropriately to maintain the safety and soundness of their operation. In 1988, the Basle Capital Accord-International Convergence of Capital Measurement and Capital Standards-introduced a uniform framework for the implementation of risk-based capital rules. However, this framework applies the same "risk weight" (a ratio applied to assets for calculation of aggregated risk assets) to loans to all the private corporations, regardless …

Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Capital Allocation and Bank Management Based on the Quantification of Credit Risk. Contributors: Nishiguchi, Kenji - Author, Kawai, Hiroshi - Author, Sazaki, Takanori - Author. Journal title: Federal Reserve Bank of New York Economic Policy Review. Volume: 4. Issue: 3 Publication date: October 1998. Page number: 83+. © Not available. Provided by ProQuest LLC. All Rights Reserved.

This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.