Managed Initiatives - Basel 2 & ILAS references

Set below is a summary of important Basel 2 and ILAS reference material arising from four principle sources:

Basel Committee on Banking Supervision (BCBS) - Basel 1 and Basel 2 Accords and papers outlining principles that banks and supervisory bodies should adhere to under Basel 2.
European Commission - Directives concerning capital requirements.
Committee of European Banking Supervisors (CEBS) - Consultation papers on liquidity and capital adequacy.
Financial Services Authority - Discussion papers, consultation papers and handbook material which set out the rules under which Basel 2 and ILAS are implemented in the UK.

Published: DailyFSA Handbook (online)

The FSA's online handbook which includes current prudential standards applying to banks, building societies and investment firms.
http://www.fsa.gov.uk/Pages/handbook/

Published: To-dateCapital Requirements Directive (CRD) Amendments

The European Commission's proposed and adopted changes to the Capital Requirements Directive (CRD).
http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

Published: December 2009BCBS Papers on Strengthening the Banking Sector

Two BCBS consultative documents on strengthening global capital and liquidity regulations. The first (CD164) aims to raise the quality of the capital base, strengthen risk coverage, supplement capital requirements with a leverage ratio and address procyclicality risk. The second (CD165) proposes minimum liquidity standards for internationally active banks based on ‘Liquidity Coverage’ and ‘Net Stable Funding’ ratios, along with a common set of monitoring metrics for supervisors.
http://www.bis.org/publ/bcbs164.pdf
http://www.bis.org/publ/bcbs165.pdf

Published: December 2009CEBS Guidelines on Stress Testing

CEBS draft revised guidelines (CP32) on stress testing that compliment guidelines on the Supervisory Review Process issued in GL03 in January 2006.
http://www.c-ebs.org/documents/Publications/Consultation-papers/2009/CP32/CP32.aspx

Published: December 2009CEBS Guidelines on Large Exposures

CEBS guidelines on two aspects of the revised large exposures (LE) regime included in the amended CRD; the definition of ‘connected clients’ and the treatment of schemes with exposures to underlying assets. Separately, CEBS also offers guidance on LE reporting requirements.
Guidelines-on-Large-exposures_connected-clients-an.pdf
Guidelines-on-Large-Exposures-reporting.pdf

Published: December 2009FSA Stress Testing Policy & CP on Capital Buffers

FSA’s policy statement (PS09/20) on firms’ own stress testing, including their stress testing infrastructure, reverse stress testing, Pillar 2 stress scenarios and capital planning. This is accompanied by a short consultation paper (CP09/30) on capital planning buffers.
http://www.fsa.gov.uk/pubs/policy/ps09_20.pdf
http://www.fsa.gov.uk/pubs/cp/cp09_30.pdf

Published: December 2009FSA Proposals on Implementing CRD2 & CRD3

FSA's consultation paper (CP09/29) on implementing changes to the Capital Requirements Directive (CRD). The CP covers the European Commission's amendments contained in two packages – ‘CRD2’ and (in part) ‘CRD3’ - made in response to the credit market turmoil of mid 2007.
http://www.fsa.gov.uk/pubs/cp/cp09_29.pdf

Updated: November 2009FSA Liquidity Waivers and Modifications

Process and requirements for applying for waivers to the FSA’s liquidity regime by subsidiaries (Intra-group Liquidity Modification) and foreign branches (Whole-firm Liquidity Modification).
http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/guidelines/liquidity_mod.shtml

Updated: October 2009ILAA Submission Information

The FSA's suggested content and format for submission of an Individual Liquidity Adequacy Assessment (ILAA) document.
http://www.fsa.gov.uk/pubs/international/adequacy_assessment.pdf

Published: October 2009FSA Policy Statement on Liquidity Standards

FSA's policy statement (PS09/16) entitled “Strengthening liquidity standards” which sets out the FSA’s final rules for the new liquidity regime. The statement includes feedback from the three related consultation papers: CP08/22, CP09/13 and CP09/14.
http://www.fsa.gov.uk/pubs/policy/ps09_16.pdf

Published: July 2009CEBS Consultation Paper on Liquidity Buffers

CEBS’ proposed guidelines (CP28) on the appropriate size and composition of liquidity buffers to enable banks to withstand a liquidity stress for a ‘survival period’ of at least one month without changing their business models.
CP28-on-Liquidity-Buffers.pdf

Published: April 2009CEBS Principles for Risk Management

CEBS’ consultative proposals (CP24) for guidance on risk management in response to the G-20 Declaration and Action Plan published in November 2008, which called for strengthening banks’ risk management practices.
CP24_High-level-principles-for-risk-management.pdf

Published: March 2009FSA’s Regulatory Response to the Global Banking Crisis

FSA’s discussion paper (DP09/2) accompanying the Turner Review, examining the causes of the financial crisis and recommending regulatory actions to create a stable and effective banking system.
http://www.fsa.gov.uk/pubs/discussion/dp09_02.pdf

Published: January 2009BCBS Proposed Enhancements to Basel 2 Framework

Consultative proposals for Pillar 1 and 3 changes, mainly focussed on securitisation /resecuritisation, and Pillar 2 guidance on risk management and capital planning, aimed to address weaknesses revealed during the financial crisis that began in 2007.
http://www.bis.org/publ/bcbs150.pdf

Published: January 2009BCBS Principles for Stress Testing Practices

The Basel Committee's “Principles for Sound Stress Testing Practices and Supervision” which sets out recommendations to banks and supervisors on developing, evaluating and applying stress tests.
http://www.bis.org/publ/bcbs147.pdf

Published: December 2008FSA Consultation Paper on Stress Testing

Proposed changes (CP08/24) to the FSA Handbook on “Stress and scenario testing”, including the introduction of a ‘reverse-stress test’ requiring firms to consider scenarios most likely to cause their business model to fail.
http://www.fsa.gov.uk/pubs/cp/cp08_24.pdf

Published: September 2008CEBS Advice on Liquidity Risk Management

CEBS views on LRM including 30 specific recommendations on liquidity management and supervision, notably in the light of the events of 2007-2008.
CEBS_2008_147.pdf

Published: September 2008BCBS Principles for Sound LRM & Supervision

Review of BCBS 2000 Sound Practices for Managing Liquidity in Banking Organisations. Guidance has been significantly expanded in a number of key areas, including risk tolerance, maintaining a cushion of liquid assets, allocating costs and risks, stress testing and contingency planning.
http://www.bis.org/publ/bcbs144.pdf

Updated: November 2007ICAAP Suggested Format

The FSA's suggested format for submission of an Internal Capital Adequacy Assessment (ICAAP). Two versions are offered; one for banks and one for small investment firms. Although the FSA does not prescribe a format, these templates are intended to assist firms in their formulation and review with the FSA.
http://www.fsa.gov.uk/pages/about/what/international/pdf/icaap_sub.pdf
http://www.fsa.gov.uk/pages/about/what/international/pdf/icaap_smaller.pdf

Published: January 2007FSA Mapping of ECAIs' Credit Assessments

A list of external credit assessment institutions (ECAIs) that are recognised by the FSA for risk weighting purposes and the mapping of their credit assessments (ratings) to credit quality steps.
http://www.fsa.gov.uk/pubs/international/ecais_standardised.pdf

Published: December 2006CEBS Guidelines on Concentration Risk

CEBS technical guidelines on concentration risk that compliment guidelines on the Supervisory Review Process issued in GL03 in January 2006.
CEBS_GL03_concentration_risk.pdf

Published: August 2006The FSA's Risk-Assessment Framework

This paper explains some important changes that have made to the FSA's risk assessment process (ARROW II) and what firms can expect from the process.
http://www.fsa.gov.uk/pubs/policy/bnr_firm-framework.pdf

Published: March 2006CEBS Paper on the ICAAP for Smaller Institutions

Recommendations for smaller institutions on how they might approach their Internal Capital Adequacy Assessment Process (ICAAP) and comply with GL03.
http://www.fsa.gov.uk/pubs/international/cebs_icaap.pdf

Published: January 2006CEBS Pillar 2 Guidelines GL03

The Committee of European Banking Supervisors (CEBS) "Guidelines on the Application of Supervisory Review Process (SRP) under Pillar 2". This includes guidelines on Internal Governance and the ICAAP.
CEBS_GL03_(CP03_revised).pdf

Published: July 2004Capital Requirements Directive

The European Commission's Capital Requirements Directive (CRD), under which Basel 2 is implemented in the EU.
http://europa.eu.int/comm/internal_market/bank/regcapital/index_en.htm

Published: June 2004'Basel 2' Capital Accord

The Basel Committee's revised framework of "International Convergence of Capital Measurement and Capital Standards".
http://www.bis.org/publ/bcbs107.htm

Published: January 1996'Basel 1.5' Capital Accord

Amendment to the Capital Accord to incorporate market risk, sometimes referred to as Basel 1.5.
http://www.bis.org/publ/bcbs24.pdf

Published: July 1988'Basel 1' Capital Accord

The 1988 Basel Capital Accord, "International Convergence of Capital Measurement and Capital Standards".
http://www.bis.org/publ/bcbs04A.pdf