Interest rate measurement

g. early redemption rights in the case of loans).
The Basel Committee on Banking Supervision, after an extensive consultation process, redrafted its recommendations for credit institutions’ regulatory capital requirements (Basel I) issued in 1988. The revision was motivated by the wish to adequately refl ect current developments in banking and to strengthen the stability of the international fi nancial system. On November 15, 2005, the Basel Committee on Banking Supervision presented the revised version of the “Basel II” Capital Accord’s framework agreement, initially released under the title “International Convergence of Capital Measurement and Capital Requirements” on June 26, 2004. The major difference between this document and the Basel I framework, which merely imposed minimum capital requirements on credit institutions, is that Basel II foresees also a supervisory reviewing process (Pillar 2) and broader disclosure obligations.
The paper entitled “International Convergence of Capital Measurement and Capital Requirements”15 published by the Basel Committee on Banking Supervision provides only general information on interest rate risk in the banking book. More specific information is contained in an additional paper entitled “Principles for the Management and Supervision of Interest Rate Risk” (July 2004).16 This paper lists 15 principles that represent minimum requirements for the management of interest rate risk by credit institutions and that define the supervisory treatment of interest rate risk in the banking book. This paper is a revised and expanded version of the “Principles for the Management of Interest Rate Risk” published in September 1997. The revision primarily concerns Principle 12 (capital adequacy), Principle 13 (disclosure obligations relating to interest rate risk), Principles 14 and 15 (regulatory aspects) as well as Annexes 3 (standardized interest rate shock) and 4 (example of a master agreement).
References
Basel Committee on Banking Supervision (2004b) ref. 11.
Schmidt et al., 1999; Allen and Santomero, 2001
Schwanitz (1996), p.5.
e.g. Schmidt et al., 1999; Allen and Santomero, 2001
See Schwanitz (1996), p.5.
See Basel Committee on Banking Supervision (2004b) ref. 11.
See Basel Committee on Banking Supervision (2004b), ref. 13ff
Basel Committee on Banking Supervision (2004a), ref. 762Р764