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Re-ageing
A process by which banks adjust the delinquency status of loans based on subsequent good performance, even though not all arrears under the original repayment schedule have been paid off.
Recognised rating agency
An agency that produces credit ratings, which meets the criteria laid down in the Directive. Ratings from these agencies may be used to calculate the capital requirements for credit risk under the Standardised Approach.
Recovery Plan
A firm’s recovery plan that sets out credible options to recover financial strength and viability should the firm come under severe stress from a range of scenarios, including both idiosyncratic and market-wide stress.
Regulatory capital requirements
The minimum capital that a financial institution is expected to hold against the risks it faces. This minimum is determined by the financial institutions calculations for credit, market and operational risk, plus any additional capital deemed appropriate under Pillar 2.
Regulatory Impact Assessment (RIA)
A tool that informs policy decisions. It is an assessment of the costs, benefits and risks of a policy option. It is not specific to the UK - many countries use a similar analysis to assess their proposed regulations and large organisations appraise their investment decisions in a similar way.
Rehypothecation
The use of pledged assets, such as collateral held against client lending, for a firm’s own purposes. This allows an investment bank to use collateral posted by its clients as collateral for its own activities.
Relevant and available
A principle of the IRB framework which requires banks to seek out and take into account as much information as possible in order to accurately assess the risk of borrowers and transactions.
Repo
Repurchase agreement. An agreement whereby one party sells the other a security at a specified price with a commitment to buy the security back at a later date for another specified price. Most repos are overnight transactions, with the sale taking place one day and being reversed the next day. Long-term repos—called term repos—can extend for a month or more.
Reserves
Those resources that a financial institution holds on its balance sheet above the level necessary to carry on its current operations. These reserves are held against uncertainty and also to take advantage of future opportunities.
Residential property
Property is used for domestic occupation rather than commercial purposes. This would represent housing stock purchased for self occupancy or for residential letting.
Resolution Pack
A detailed information pack provided by a firm about their business and operational structure to the authorities (Bank of England and FSA) to enable them to prepare a Resolution Plan for that firm.
Resolution Plan
A plan prepared by the authorities (Bank of England and FSA) for putting a firm that fails to meet threshold conditions into resolution in an orderly manner and with minimal impact on the financial system.
Restructured loans
Property is used for domestic occupation rather than commercial purposes. This would represent housing stock purchased for self occupancy or for residential letting.
Retail lending/exposures
Loans and other commercial lending made to individuals or small businesses (typically not private or public limited companies).
Reverse Stress Testing
In contrast to other stress testing, reverse stress testing starts from assuming an adverse outcome, such as failure of the business, and attempts to determine the possible chain of events, and their degree of severity, under which this may occur.
Risk Asset Ratio (RAR)
Synonym for Capital Ratio.
Risk assessment process
The process under which an institution identifies the risks to which it is exposed either through its commercial activities, or through its own internal business processes.
Risk exposures
The commercial operations and management of banks which create the possibility of potential financial loss.
Risk management
The processes by which an institution manages its various sources of risk. These include internal controls and procedures, tools to reduce or mitigate risks and the policies a bank adopt to reduce potential risk exposures.
Risk mitigants
Techniques and financial instruments designed to reduce a bank's risk exposures. These may include insurance against operational risk (under AMA) or techniques to reduce credit risk (see Credit Risk Mitigation).
Risk weight
A parameter reflecting the relative risk of a type of lending, counterparty (credit risk) or business activity (operational risk). These weightings are used in the calculation of regulatory capital requirements.
Risk-weighted Asset
A risk-weighted asset (RWA) reflects the amount of a bank’s asset (e.g. a lending exposure), adjusted for risk (e.g. risk of credit default). A risk-weighting reflects the degree of risk and is multiplied by the value of the asset to determine its RWA value.
RMG
Risk Management Group - a group set up by the Basel Committee that has been considering the operational risk elements of the revised Accord.
RRP
Recovery and Resolution Plan.
RST
Run-off
Reduction in a bank’s deposit base, or loan portfolio, as customer deposits are withdrawn, or customer loans are paid off, and not replaced at the same rate.
RWA
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