Email News Service February 2013: Basel takes aim at bank VaR calculations; G20 monitoring impact of regulations on long-term finance

LONDON, February 18 (Global Risk Regulator) – Global banking regulators are taking aim at the way banks use different historical time periods when calculating Value-at Risk (VAR), the crucial component for determining trading book capital requirements, according to UK press reports. Some banks use one year of data, others look as far back as five years and as a result tend to have higher regulatory capital requirements because their models include wild market swings from the 2008 financial crisis, the Financial Times newspaper said today. The Basel Committee of banking supervisors wants to standardise the period in banks’ models to somewhere between two and five years of data, although nothing has been finalised, the FT said. The Committee, which sets international banking standards, was embarrassed last month by the results of its own study which revealed wide variations in the level of capital held by different banks against trading exposures with the same risk (See “Basel to curb banks’ risk models after shock study” in GRR newsletter for February 2013).