April 22, 2010
Title: Incremental Risk Charge in Basel II
Abstract: In July 2009, the Basel Committee released the final guidelines for computing capital for trading books. These guidelines include revisions to existing rules for computing Value-at-Risk, as well as a request to build a new "Incremental Risk Charge", which captures credit risk over a one-year horizon. Banks have until the end of 2010 to comply with the revised requirements and OSFI has also set ambitious timelines. The Basel Committee's Trading Book Group (TBG) has also just released the results of the quantitative impact study (QIS) to assess the quantitative impact of proposed revisions to Basel II's market risk framework, which it performed in early 2009. In particular, the study finds that the incremental risk capital charge results in an average increase of market risk capital of over 100 per cent.