PRMIA Event - How Much Capital Does a Bank need?

To discuss this fundamental question, PRMIA Netherlands is pleased to welcome Idzard van Eeghen (Head of Integrated Risk Management at ABN Amro and co-author of "Economic Capital – How it Works and What Every Manager Needs to Know") and Laurent Balthazar (Head of Risk Strategy at Dexia and author of "From Basel I to Basel III).

The speakers will consider, inter alia, the recent Turner review, which listed the following seven points for Capital Adequacy:

1. The quality and quantity of overall capital in the global banking system should be increased, resulting in minimum regulatory requirements significantly above existing Basel rules.

 2. Capital required against trading book activities should be increased significantly (e.g. several times) and a fundamental review of the market risk capital regime (e.g. reliance on VAR measures for regulatory purposes) should be launched.

3. Regulators should take immediate action to ensure that the implementation of the current Basel II capital regime does not create unnecessary procyclicality; this can be achieved by using ‘through the cycle’ rather than ‘point in time’ measures of probabilities of default.

4. A counter-cyclical capital adequacy regime should be introduced, with capital buffers which increase in economic upswings and decrease in recessions.

5. Published accounts should also include buffers which anticipate potential future losses, through, for instance, the creation of an ‘Economic Cycle Reserve’.

6. A maximum gross leverage ratio should be introduced as a backstop discipline against excessive growth in absolute balance sheet size.

7. Liquidity regulation and supervision should be recognised as of equal importance to capital regulation. More intense and dedicated supervision of individual banks’ liquidity positions should be introduced, including the use of stress tests defined by regulators and covering system-wide risks. Introduction of a ‘core funding ratio’ to ensure sustainable funding of balance sheet growth should be considered.

The meeting will start at 6pm. Each speaker will talk for approximately 30 minutes, after which there will be an interactive discussion on matters arising. Drinks will be served from 7.30pm onwards.

You can register for this fee event on line at the PRMIA website.