- Standardized approach
According to International Convergence of Capital Measurement and Capital Standards, known as
Basel II , the standardized approach is a set of risk measurement techniques for banking institutions. The term may be used in the context ofcredit risk oroperational risk .Standardized approach for credit risk
The Basel Accord proposes to permit banks a choice between two broad methodologies for calculating their capital requirements for credit risk. One alternative is to measure credit risk in a standardised manner, supported by external credit assessments. The other alternative is based on internal ratings.
The approach supported by external credit assessment is known as
standardized approach (credit risk) .Standardized approach for operational risk
In the
standardised approach (operational risk) , banks’ activities are divided into eight business lines: corporate finance, trading & sales, retail banking, commercial banking, payment & settlement, agency services, asset management, and retail brokerage. Capital for operational risk for each of these lines is a percentage of the bank's gross income from that particular line of business.ee also
*
Foundation IRB
*Advanced IRB
*Basic approach
*Advanced measurement approach
*Basel II
*Basel Accord References
*http://www.bis.org/publ/bcbsca.htm Basel II: Revised international capital framework (BCBS)
*http://www.bis.org/publ/bcbs107.htm Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework (BCBS)
*http://www.bis.org/publ/bcbs118.htm Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework (BCBS) (November 2005 Revision)
*http://www.bis.org/publ/bcbs128.pdf Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework, Comprehensive Version (BCBS) (June 2006 Revision)
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