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Current Event: ECB temporarily allows lower capital requirements for market risk

Sixcarbs

Active Member
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Since one of the capital requirements is proportional to volatillity the ECB has lowered the multiplier to offset the higher volatility.

Seems like a bad idea to me. Markets are all over the place, the higher capital requirements seem justified.

But their game, their dice, their rules.

https://www.bankingsupervision.europa.eu/press/pr/date/2020/html/ssm.pr200416~ecf270bca8.en.html

....The ECB is temporarily reducing a supervisory measure for banks – the qualitative market risk multiplier – which is set by supervisors and is used to compensate for the possible underestimation by banks of their capital requirements for market risk....
 
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