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Basel 4

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Risk Management
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University Of California Los Angeles
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Basel IV-Standardized Approach
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A Single Standardized Approach for All
Introduction
Past financial crises forced credit institutions to adopt stronger regulations that guarantee
consumer protection and financial stability. Implementing Basel IV single standardized approach
for all is expected to discontinue the basic indicator approach, advanced measurement approach,
and the alternative standardized approach (Financial Services Risk and Regulation-Operational
risk a single standardized approach for all, 2018). These changes are intended to lower the
operational risk by enforcing sound business practices that increase comparability between banks
through increased bank supervision of revenue, systems, controls, and losses.
Basel IV committee changes on the regulatory landscape are expected to cause
significant effects on the calculation of operational risk capital with the adoption of regimes that
increase compatibility between credit institutions. Past and current Basel models allowed for
many internal models, such as the advanced measurement approach for operational risk.
However, this exposed the regulatory system to the difficulty of comparing separate banks
because they all had unique specific idiosyncratic models. Adopting a similar measurement
system enables different regulators to compare various banks.
Basic Indicator Components
Basel IV Accords' unique measurement is assessed regarding income or revenue earned
by a particular credit institution versus the internal loss history of the organization. Therefore the
increase of operational risk is dependent on the amount of revenue generated by the bank. The
assumption is that the bigger the bank, the more revenue they generate and the more operational

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1 Basel IV-Standardized Approach Student’s Name University Course Professor Date 2 A Single Standardized Approach for All Introduction Past financial crises forced credit institutions to adopt stronger regulations that guarantee consumer protection and financial stability. Implementing Basel IV single standardized approach for all is expected to discontinue the basic indicator approach, advanced measurement approach, and the alternative standardized approach (Financial Services Risk and Regulation-Operational risk – a single standardized approach for all, 2018). These changes are intended to lower the operational risk by enforcing sound business practices that increase comparability between banks through increased bank supervision of revenue, systems, controls, and losses. Basel IV committee changes on the regulatory landscape are expected to cause significant effects on the calculation of operational risk capital with the adoption of regimes that increase compatibility between credit institutions. Past and current Basel models allowed for many internal models, such as the advanced measurement approach for operational risk. However, this exposed the regulatory system to the difficulty of comparing separate banks because they all had unique specific idiosyncratic models. Adopting a similar measurement system enables different regulators to compare various banks. Basic Indicator Components Basel IV Accords' unique measurement is assessed regarding income or revenue ear ...
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