1. The need for banks to hold capital as a cushion against ‘UL’ will be dealt with in detail in the Chapter ‘Capital—Risk, Regulation and Adequacy’.
3. Also defined simply as the value of the loan outstanding less the market (realizable) value of collateral held by the bank.
4. See Chapter on ‘The Lending Function’ for more on loan pricing.
5. Constantinos Stephanouand Juan Carlos Mendoza, ‘Credit Risk Measurement under Basel II: An Overview and Implementation Issues for Developing Countries’, World Bank Policy Research Working Paper 3556, Fig. 1 (2005): 7
6. Basel Committee on Banking Supervision, ...