A new regulation; finding the right
balance
The focus of the Basel II implementation is increasing more on Pillar II requirements like liquidity and concentration risk. In parallel, European regulators are trying to upgrade the existing large exposure regulation which is often intertwined with concentration risk of Pillar II.
When creating the new Capital Requirements Directive (CRD), the intention of the European Commission was to adapt existing text following the Basel II framework. These adaptations have been published by local regulators in EU member states, such as the FSA in the UK.
This paper analyses the new Capital Requirements Directive (CRD) and its expected impact on components of Basel II. It then examines the potential changes to the large exposure regulation and its likely impact on IT departments within financial institutions. Finally, it identifies key components that should be incorporated in the IT solution to ensure ‘large exposure compliance’.
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