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zequant
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Reg Cap breakdown

January 27th, 2021, 9:46 pm

Does anybody have any idea (ideally with a reference) of the relative size of various regulatory capital requirements for a typical large (sifi) bank?
I.e. market risk vs counterparty default risk vs cva risk vs operational risk etc

Thanks
 
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Re: Reg Cap breakdown

January 27th, 2021, 10:00 pm

Does anybody have any idea (ideally with a reference) of the relative size of various regulatory capital requirements for a typical large (sifi) bank?
I.e. market risk vs counterparty default risk vs cva risk vs operational risk etc

Thanks
Here is a short overview to start, with links:

Capital requirements for the banking sector - Council of the European Union December 21, 2020

and then:

Basel III: international regulatory framework for banks
A series of summaries and then down to the details

and to help stay current: The Basel Framework 
"Please note, the Framework was updated on 22 January 2021 and now incorporates all changes that the BCBS has published since the December 2019 launch."

If you are looking at the US in particular, try here for starters as well: Board of Governors of the Federal Reserve System - Supervisory Policy and Guidance Topics - Capital Adequacy 

The spectacle is not a collection of images, but a social relation among people, mediated by images. - Guy Debord
 
zequant
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Re: Reg Cap breakdown

January 28th, 2021, 7:41 am

Thanks for that. I have a reasonable grasp of the framework and calculations involved. What I am lacking is a feel for relative size of the different charges. E.g. a breakdown of total capital like 10% market risk, 30% counterparty default risk, 20% CVA risk, 20% operational risk, etc. In other words, if a bank has 100 billion in RWAs, how much does each risk type contribute.
Obviously this will vary by institution, but my guess (hope) is that most large investment banks will look roughly the same. 
 
zequant
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Re: Reg Cap breakdown

January 28th, 2021, 10:22 am

In case anyone else is interested: after a bit of searching, I found that the breakdown I am talking about is available as part of a banks public "pillar 3 disclosure", which breaks down RWA by risk category. Unfortunately so far I haven't been able to find a report (e.g. by some regulator or consultancy) that nicely summarizes this across the industry.
 
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Re: Reg Cap breakdown

January 28th, 2021, 10:53 am

In case anyone else is interested: after a bit of searching, I found that the breakdown I am talking about is available as part of a banks public "pillar 3 disclosure", which breaks down RWA by risk category. Unfortunately so far I haven't been able to find a report (e.g. by some regulator or consultancy) that nicely summarizes this across the industry.
Still not exactly what you are looking for, but downloadable data set and scores for the various G-SIBs within subcategories here: (2020):

Bank Systemic Risk Monitor - Office of Financial Research
https://www.financialresearch.gov/bank- ... k-monitor/

A separate link will show you the info under US methodology.
So this might give you and anyone else who is interested some ideas on additional sources as you continue to look around. It also highlights the variability between banks on this front. See e.g. leverage ratios.

See also:
FFIEC - National Information Center
https://www.ffiec.gov/npw/FinancialReport/FRY15Reports - time lag of about a year - 2019 data was posted in November 2020. But check in particular the tab Summary Visualizations.

This posting at Clarus Fin Tech outlines info for the six largest banks and shows a detailed graph and spreadsheet on the components of the RWAs by type (credit, ops, market). But published in 2017 - https://www.clarusft.com/capital-ratios ... -us-banks/. Deloitte has material too. What you are looking for may be hiding in plain sight; will see if anyone else has links or ideas of how to get at it. Good luck.
The spectacle is not a collection of images, but a social relation among people, mediated by images. - Guy Debord
 
zequant
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Re: Reg Cap breakdown

January 28th, 2021, 12:43 pm

Thanks, very useful!
 
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Samsaveel
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Re: Reg Cap breakdown

February 2nd, 2021, 4:40 am


Obviously this will vary by institution, but my guess (hope) is that most large investment banks will look roughly the same. 

 Why would you expect that the capital charge across the whole spectrum of capital charges , covering all types of risk, under Basel Pillar 2 or even 1 would approximately  be the same ?   Do you expect these "large" institutions  to have about the same risk exposures to different underlying risk factors ?  how much variability is included in "roughly?"