Capital Requirements for Latin American Banks in Relation to Their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America

22 Pages Posted: 20 Apr 2011

See all articles by Andrew Powell

Andrew Powell

Inter-American Development Bank (IDB); Universidad Torcuato Di Tella - School of Business; Harvard University - Center for International Development (CID)

Veronica Balzarotti

affiliation not provided to SSRN

Date Written: October 1997

Abstract

Banks' market or 'trading' risks have increased noticeably over the past years, largely as a result of the growth of liquid assets on banks' balance sheets and the increase in banks' off-balance sheet activities. Well-publicized bank failures and significant capital losses have focussed further attention on these developments. In January 1996, the Basle Committee recommended the imposition of capital charges related to banks` trading risks, and the European Community's Capital Adequacy Directive (CAD) came into force on January 1st, adopting, in part, the Basle Amendment. The G10 countries are committed to full implementation of these recommendations by the end of 1997. This paper reviews the main features of the Basle Amendment, which allows banks a choice between a 'standardized methodology' and the use of their own internal models, subject to the authorization of the relevant supervisor and a set of parameter values. The relevance of this regulation for Latin America is analysed in the light of the region's characteristics. We suggest that these characteristics increase rather than diminish the importance of the implementation of market risk capital requirements in Latin America.

Suggested Citation

Powell, Andrew P. and Powell, Andrew P. and Balzarotti, Veronica, Capital Requirements for Latin American Banks in Relation to Their Market Risks: The Relevance of the Basle 1996 Amendment to Latin America (October 1997). IDB Working Paper No. 287, Available at SSRN: https://ssrn.com/abstract=1815975 or http://dx.doi.org/10.2139/ssrn.1815975

Andrew P. Powell (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina
+5411 4787-9349 (Phone)
+5411 4783-3220 (Fax)

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Veronica Balzarotti

affiliation not provided to SSRN ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
24
Abstract Views
577
PlumX Metrics