A recent review of the supranational regulatory agencies and
the rating agencies, all of whom are readjusting their analysis, we can now
comfortably specify the capital requirements for most financial institutions in
a few sentences:
With the CCAR (DFAST) and AQR results published, we merely have to
derive the PPNR and TLAC to calculate the leverage ratios and tier one capital
ratios (CET1), we can calculate the supplementary leverage ratios (SLR) and
enhanced supplementary ratios (ESLR) plus any conditional buffers required
and/or additional loss absorption capacity (ALAC) the analysis (adjusted for
contingent capital) required. All of
this includes consideration of advanced vs. standardized approaches, any
transitional arrangements (or parallel run), any netting interpretations, and
the appropriate risk weighting applications. For international considerations,
there are significant cross border differences each step in the calculations. There
is also the potential intersection of the liquidity coverage ratio(s) and the
leverage ratios.
Piece of cake
Posted in the Linkedin Risk managers group in November
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