Topic 11 Flashcards
Own funds is
Distinct from funds dep by customers
Share cap + retained profits
Capital adequacy regs broadly state….
Institutions must have enough cap to make it very unlikely deps would be at risk
Capital being ‘own funds’
Basel accord
27 nations at basel committee 1988
set out min cap req for banks
Basel 2
2007
Expanded accord
Incorporated in capital requirments directive crd
Includes req for operational risk for 1st time
Intro stress test
Solvency ratio is
Pwn funds as a % of risk adjusted value of assets
Should be at least 8%
examples of % contribution to risk weighted lending
0% cash
20% loans to gov, banks
50% secured loans
100% unsec loans
Cap req for op risk calc
Times gross annual income averaged over 3 yrs by 0.15
Basel 3
Higher levels of cap req
Jan 2013
CRD
Cap req directive
Set out min cap req for inv firms
Life directive states…
That life ass co must mantain aquequate solvency margin
The sol margin is the excess over the mathematical provisions
The req min margin 4%
3 euro supervisory auth? ESAs
European securities and markets agency ESMA
euro banking agency EBA
euro ins and occ pension auth EIOPA
Point of the ESAs?
One rule book across eu
Mediate bet nations auths
Take cross eu actions
Fin serv action plan FSAP 3 strat objectives
June 99
Single eu market
Markets open and secure
Stengthen rules on pru supervision
Markets in fin instruments directive MiFID
Ensures that
Firm subject to mifid has single passport for eu
High level of regulation in each states
MiFID covers what type of inv
Derivatives, inv advice, complexe inv, when client money held etc
Not life ass, pensions, ins co, re ins co etc
