De riesgo del comité de basilea categorías de

TITLE OF ASSIGNMENT

Basel Committee’s risk categories: In context of financial institutions & non financial operations

Month and year of submission

DECEMBER 2007

Table of Contents

1. Introduction 3
1.2 Background Summary 3
2. Basel I Accord 3
2.1 Risk Weight 4
2.2 Exposure 4
2.3 Shortcomings of Basel I Capital Accord 5
3. Basel II Accord 5
3.1Pillar I - Minimum Regulatory Capital Requirements 6
3.1.1 Credit Risk 6
3.1.2 Operational Risk 7
3.2 Pillar II - Supervisory Review Process 7
3.2.1 Principle I 8
3.2.2 Principle II 8
3.2.3 Principle III 8
3.2.4 Principle IV 8
3.3 Pillar III – Disclosure & Market Discipline 8
4. Extent of Application to Non-Financial Institutions 9
4.1Operational, Credit & Market Risk 9
4.1.1 Justification of Operational Risk Approach in Comparison 9
4.2 Operational Risk, Supervision & Disclosures: Elements 9
4.2.1 Compliance vs Efficient Performance 9
4.2.2 Sources of Operational Risk for Non-Financial Institutions 10
4.3 Manufacturing Sector: Quality Measurement & Standards 10
4.3.1 Statistical Process Control10
4.4 Public & Private Sector Companies: Quality & Standards 11
4.4.1 Quality Models & Standards for Organizations 11
4.5 Application to Professional Service Sector 12
4.5.1 Waterfront Management Consultants: Risk Management Process 12
4.5.2 Best Practice: Operational Risk 12
4.5.3 Best Practice: Strategic Risk 12
4.6 UK Government & Public ServiceSector: Managing Operational Risk 13
4.6.1 Senior Information Risk Owner (SIRO) 13
5. Discussion & Analysis 14
5.1 Basel I & II: Conflicts, Assumptions 14
5.2 Need for Consistency 14
5.3 Non-Financial Institutions: Robust Risk Culture 14
6. Conclusion 15
7. Bibliography & Reference 15

Report Overview

1. Introduction

The Basel II Capital Accord is the successor ofthe Basel I Capital Accord (1988). The Basel I Capital Accord represented the first step toward risk-based capital adequacy requirements. However, since 1988 the financial world has changed dramatically and there existed a growing need within the financial world for a new capital accord. In 2007 a new capital accord will become operative, and it will improve the Basel I Capital Accord on severalaspects.

The first part of this report describes the framework for bank and financial services supervision and regulation as outlined by the Basel committee. This is part of ongoing efforts to promote adequate transparency and effective market discipline. In addition, a well-informed investors, depositors, creditors and other bank counterparties can provide a bank with strong incentives tomaintain sound risk management systems and internal controls and to conduct its business in a manner that is both prudent and consistent with stated business objectives.

In the second part of the document, I will apply the committee’s framework to non-financial institutions and the private sector.

2. Basel I Accord

The first initiative from BIS came in the form of Basel I accord with over 100central banks in different countries accepting the benchmarks stipulated under the agreement [4]. The Basel I Capital Accord represented the first step toward risk-based capital adequacy requirements. The accord was an agreement by the members of the Basel committee on Banking Supervision (BCBS) with respect to minimum regulatory capital for credit risk. Credit risk is the possibility of a loss asa result of a situation that those who owe money to the bank may not fulfil their obligation. Regulatory capital refers to the risk-based capital requirements under the Capital Accord. The purpose of regulatory capital is to ensure adequate resources are available to absorb bank-wide unexpected losses [4, 5, and 6]. Under the rules of the Basel I accord, the minimum regulatory capital...