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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The standardized approach
The standardized approach is very similar to the original Basel I. Instead of giving an identical weighting of 100% to all loans, the weighting will be related to the riskiness of the transaction, as identified by the rating of external rating agencies. An example is given for corporate loans.[2]
[2] The reader is advised to read the Basel II document for a complete analysis of weighting for different types of transactions.
| AAA – AA– | A+ – A– | BBB+ – BBB– | BB+ – BB– | Below BB– | Unrated | |
| Corporate | 20% | 50% | 100% | 100% | 150% | 100% |
For example, a loan to a corporate client rated A+ would be weighted at 50%. This implies that on a loan of $100, the capital charge is calculated as follows:
Capital ≥ 8% × ($100 × 50%) = $4
From the perspective ...
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