March 2002
Intermediate to advanced
176 pages
3h 48m
English
book
Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
by Jean Dermine, Youssef F. Bissada
Content preview from Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
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Asset weighting
To measure the asset base, the regulators decided in 1988 to take into account credit risk. Assets on the balance sheet together with bank commitments (the off-balance sheet transactions) are weighted by a factor indicative of their credit risk (going from 0% for non-risky OECD public debt to 100% for risky private debts).
Weighting rules for assets are shown in Figure 6.1. (Weighting for off-balance sheet items is given in the appendix at the end of this stage.)
Figure 6.1. Weighting rules for assets
ExampleLet us take as an example the (slightly modified) e-Bank balance sheet.
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