Background

Credit is risk one of the most important risk faced by banks and financial institutions. Therefore, computation of economic capital for credit risk is important aspect of risk management.

Economic Capital

For any bank or financial institution’s effective capital management, the starting point is the regulatory capital, i.e., the capital computed in accordance with Basel III capital adequacy framework. The next step is development of economic capital framework.

For more details, please watch following video:

RISK-BASED LOAN PRICING, LDM Risk Management

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