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Risk-weighted asset (also referred to as RWA) is a bank's assets or off-balance-sheet exposures, weighted according to risk. [1] This sort of asset calculation is used in determining the capital requirement or Capital Adequacy Ratio (CAR) for a financial institution.
Capital Adequacy Ratio (CAR) also known as Capital to Risk (Weighted) Assets Ratio (CRAR), [1] is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements. It is a measure of a bank's capital.
Risk-weight functions - Functions provided as part of the Basel II regulatory framework, which maps the risk parameters above to risk-weighted assets; Minimum requirements - Core minimum standards that a bank must satisfy to use the internal ratings-based approach; The accord provides two broad approaches that a bank can follow: [5] Foundation ...
A Credit valuation adjustment (CVA), [a] in financial mathematics, is an "adjustment" to a derivative's price, as charged by a bank to a counterparty to compensate it for taking on the credit risk of that counterparty during the life of the transaction. "CVA" can refer more generally to several related concepts, as delineated aside.
The term Advanced IRB or A-IRB is an abbreviation of advanced internal ratings-based approach, and it refers to a set of credit risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions.
Regulators have said the proposal would result in a 16% increase in capital levels and a 20% increase in risk-weighted assets for big banks. ... One big bank lobbyist, Financial Services Forum ...
The term standardized approach (or standardised approach) refers to a set of credit risk measurement techniques proposed under Basel II, which sets capital adequacy rules for banking institutions. Under this approach the banks are required to use ratings from external credit rating agencies to quantify required capital for credit risk. In many ...
Another term commonly used in the context of the frameworks is economic capital, which can be thought of as the capital level bank shareholders would choose in the absence of capital regulation. [4] The capital ratio is the percentage of a bank's capital to its risk-weighted assets. Weights are defined by risk-sensitivity ratios whose ...