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


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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.


....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....