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Risk Management in Australia
Risk Management in Australia
You are invited to ask any question or raise any issue on this thread – just keep it relevant and keep it clean (and relevant to banking or risk management)!
5 comments
12 January, 2006 at 14:13
Andrew
I am looking for methodologies to populate a conditional transition matrix using a z score. I am aware of the paper by Jongwoo Kim of Riskmetrics. Are there any others?
24 May, 2006 at 19:09
graemebird
Does the Reserve Bank make any use of the Reserve Asset Ration any more? If so where does it stand?
If there is no formal ration what would be the typical amount of cash that banks would keep on hand in relation to their on-call committments.
24 May, 2006 at 19:54
Andrew
Graeme,
Banks typically forecast their liquidity needs over various terms into the future under normal scenarios and then hold sufficient liquidity to cover these requirements. Additionally, they tend to hold resourses that
In BoA’s case, this period is 29 months.
The reserve asset ratio has not been used as a tool for many years now. APRA monitors the liquidity profiles and can force the banks to increase their cash holdings if they feel they have dropped too far.
Capital requirements are mandated internationally under the Basel accords, with APRA being responsible for their local implementation.
25 May, 2006 at 21:29
graemebird
“Capital requirements are mandated internationally under the Basel accords, with APRA being responsible for their local implementation.”
By this do you mean liquidity requirement?
And if so is this a defacto Reserve Asset Ration.
And if so what level is typical?
26 May, 2006 at 02:37
Andrew Reynolds
Graeme,
No, I mean capital. I wrote sections of the wiki article on this – http://en.wikipedia.org/wiki/Capital_requirement
The new Basel accords to a certain extent are a move towards a free banking environment – they allow banks to model their own capital requirement if they can satisfy the regulator that they can do it well enough.
Liquidity risk is not subject to as much regulation now as it used to be – have a look at the APRA site (http://www.apra.gov.au/Policy/Prudential-Standards-Guidance-Notes-for-ADIs.cfm) and then look at APS 210 and associated sections for more.
Para 7 of APS 210 is the one that most of the large banks in Australia now follow – the para 9 exception is only used for the really small ones. Essentially, provided you can satisfy APRA that you have enough liquid assets to meet the two para 8 requirements they will let you go for it.