Basel II, Shared National Credits and Market Risk

11 December 2006

Institutional Risk Analytics has published a commentary in the November/December issue of GARP Risk Review, the magazine of the Global Association of Risk Professionals.

Entitled "Regulatory Hazards: Basel II, Shared National Credits and Market Risk," the article explores how the delay in the implementation of the Basel II proposal in the US is affecting the regulatory agenda regarding important initiatives such as Shared National Credits and the pending revisions to the rule regarding Market Risk.

"The retreat of the US banks from the Basel II process has serious regulatory implications and comes as regulators are becoming increasingly concerned about both lending standards and credit risk," writes IRA principal Christopher Whalen. "Simply put, if the big banks opt out of the AIRB approach [of Basel II], much of the regulatory agenda intended to make the US supervisory process more sensitive to credit and counterparty risk becomes moribund."

"The US’s problems with Basel II have been well documented, but what is less well known is that the implementation delays have also caused slowdowns in the development of a national credit ratings system," the article continues. "America’s Basel II dilemma has not only caused setbacks in the expansion of credit ratings but could also lead to an increase in risk-based capital charges for market risk."

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