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Discussion: Altman and Saunders on Relative Credit Risk & Carey on Absolute Credit Risk

  • Richard J. Herring
Part of the The New York University Salomon Center Series on Financial Markets and Institutions book series (SALO, volume 9)

Abstract

Each of these excellent papers makes imaginative use of data reflecting actual credit loss experience to illuminate different features of the Basel Committee’s new proposal for risk-adjusted capital requirements (Basel II). Altman and Saunders (A&S, 2002) use default data on publicly traded bonds to investigate the relative risk weights for credit risk. Carey (2002) uses similar data over historical credit cycles to calibrate a model that can gauge whether absolute level of capital requirements is appropriate. I will review each contribution in turn and conclude with some additional questions about the new Basel proposal. But first, a bit of background about how international capital requirements have evolved.

Keywords

Credit Risk Capital Requirement Basel Committee Credit Rate Agency Risk Weight 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. Altman, Edward I. and Anthony Saunders, 2002, “The Role of Credit Ratings in Bank Capital,” Chapter 4 in this volume.Google Scholar
  2. Buser, S.A., A.H. Chen and E.J. Kane, 1981, “Federal deposit insurance, regulatory policy, and optimal bank capital,” Journal of Finance, 36 (March), 51–60.Google Scholar
  3. Carey, Mark C., 2002, “A Policymaker’s Guide to Choosing Absolute Capital Requirements Under an IRB Approach,” Chapter 5 in this volume.Google Scholar
  4. Shadow Financial Regulatory Committee, 2000, Reforming Bank Capital Regulation, Statement No. 160, March 2, 2000, The AEI Press.Google Scholar

Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Richard J. Herring
    • 1
  1. 1.The Wharton SchoolUniversity of PennsylvaniaUSA

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