ISDA, LIBA, the Institute of International Finance and the International Banking Federation have responded to the Basel Committee’s consultation on revising the Basel II market risk framework. Its key messages:
- support a more practical and effective solution to raising additional capital in the short term;
- recommend considering whether firms can still adopt full scope incremental risk charge modelling;
- show concern about proposals to remove the availability of trading book capital charges from certain exposure types;
- query the logic of some of the proposals relating to “stressed” VaR; and
- caution against widening the gap between financial reporting based on accounting standards and reporting for regulatory capital purposes.