Indicative FSP

Background Study on the New Capital Adequacy Framework Basel II for Financial Institutions

This project deals with the implementation of the new capital Adequacy Framework, known as Basel II. Capital adequacy is not only a field of surveillance and supervising authorities, but also a basic strategic priority for financial institutions. Basel II framework implementation is introduced a few years after the first Basel committee framework in 1982 and is the basic guide for the assessment of all different types of risk (basically market risk, credit risk and operational risk), suggesting standardized and foundational approaches for each of them and more generally drafting a general framework for the operation of all financial institutions business lines. At the same time, this Basel II capital adequacy framework underlines the importance of strict supervision and organized surveillance of financial institutions, based on the 3 pillars of the Basel II framework. This project focuses on the assessment of the different risks that modern financial institutions face, their quantification under up to date standardized or developing methods and on their back testing. All these methods constitute the different economic capital calculation, according to their different characteristics. The different current situation for major Greek and foreign financial institutions is discussed, according to their approaches towards the implementation of the new framework. The Central Banks practices under the framework they proposed are analyzed. Finally various qualitative and quantitative characteristics of the financial institutions’ portfolio and structure are analyzed, leading to specific proposals.

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