Latest posts
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🏦 Basel I: How to Stop a Bank from Sinking in Its Own Risk Pool
Or, how the world’s regulators learned to say: “Not all loans are created equal.” 📏 Basel’s Big Idea: Not Just Capital, but Risk-Weighted Capital Imagine you’re packing a lifeboat. Do you treat a gold bar and a rubber duck the same? Hopefully not. Before Basel I, regulators were basically doing just that — evaluating bank…
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🏦 From Marble Columns to Risk Ratios:
Why the Basel Regulations Exist and Why They Keep Getting a Makeover 🏛️ Once Upon a Time, Banks Were Big, Fancy Buildings Long before banks had stress tests or capital adequacy ratios, their main way of signaling stability was… architectural. Giant columns, thick vault doors, and intimidating marble — because nothing says “trust us with…
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🏦 Capital Under Pressure:
How to Assess the Real Strength of a Bank When Stress Hits the Fan 🧠 Why Assessing Capital Adequacy Isn’t Just a Checkbox Imagine a bank as a luxury cruise ship. The capital is the ship’s hull — it keeps everything afloat. But here’s the catch: Even the strongest-looking hull can crack if you haven’t…
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The 7 Practices Behind a Strong Capital Adequacy Process $($That Even a CFO Can Love$)$
💡 Why Capital Adequacy Matters $($a Lot$)$ Imagine your bank as a castle. Capital is the moat, the drawbridge, and the armed guards rolled into one — it’s what protects the kingdom from enemy attacks (market crashes, credit defaults, reputational disasters). If you don’t plan and maintain that capital fortress properly, you’re just one storm…
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🏦 How to Keep a Bank from Falling Over:
The Federal Reserve’s Capital Plan Rule and the 7 Principles of Capital Adequacy (or how to survive a financial hurricane with a decent umbrella) 💣 Why Do Banks Need Capital $($Besides Looking Rich$)$? Let’s say a bank is like a ship. Capital is the hull — it protects against leaks, storms, and the occasional iceberg…
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From BIS Recommendations to Boardroom Reality
🧠 It’s Not Just About Having a Risk Model — It’s About Using It Right Congratulations! You’ve got a shiny economic capital model that spits out numbers, quantifies tail risk, and impresses your board. But here’s the catch: “Is anyone actually using this model to make decisions?” Enter: the Bank for International Settlements (BIS) —…
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How to Validate, Untangle, and Survive the Risks Lurking in Your Models
👓 “Can I Trust This Model, or Am I Being Catfished by Math?” Let’s start with the most important question any bank can ask: “Does this model actually work — or does it just look smart while plotting my downfall?” In economic capital modeling, trust is everything. These models predict how much capital a bank…
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Economic Capital Frameworks Challenges
🤔 So, What’s Economic Capital — and Why Should I Care? Imagine your bank is a castle. Economic capital is the moat that keeps financial monsters(defaults, market crashes, rogue traders) from burning your kingdom down. But building the moat isn’t just about digging a ditch. You need to: Welcome to economic capital modeling. It sounds…