Management of Retail Assets in Banking: Comparison of Internal Model Over Basel
International Journal of Rural Development and Management Studies, Volume 2 • Number 2 • December 2008
6 Pages Posted: 19 Apr 2021
Date Written: DECEMBER 19, 2008
Abstract
Retail Assets in Banks has grown due to the trend among banks to grow at a much faster space. Unlike the commercial exposures banks manage retail assets on pooled basis. In this paper, we discuss the methodology of creating pools of revolving retail assets. We compare the capital charges generated by the Basel’s formula with the capital charges generated by two possible earnings at-risk internal capital allocation models. We find that in general, Basel’s capital ratios are closer to those generated by our models for the groups with lower credit risk. We explain the discrepancies to the different ways Basel and our models account for future margin income, to Basel’s’ assumptions about asset correlations
Keywords: CAPITAL, ADVANCED, BASEL, BANKING
JEL Classification: G0, G2
Suggested Citation: Suggested Citation