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The proposed incremental risk charge would capture price changes due to defaults as well as other sources of price risk, such as those reflecting credit migrations and significant moves of credit spreads and equity prices.
The guidelines, developed jointly by the Basel Committee and IOSCO, support one of the key recommendations for strengthening prudential oversight set out in the FSF report presented to G7 Finance Ministers and Central Bank Governors in April 2008.
The proposal will better align regulatory capital requirements with the risk exposure of banks' trading book positions, Nout Wellink, Chairman of the Basel Committee said.
Deadline for comments is
Guidelines for Computing Capital for Incremental Risk in the Trading Book