What is pillar 2A and 2B?

The Internal Capital Adequacy Assessment Process (ICAAP) is the process in which the Board and management of the bank oversees and regularly assesses: the bank’s own assessment of the additional capital (Pillar 2A and Pillar 2B) over and above the regulatory minimum (Pillar 1); and.

What are Pillar 2 requirements?

The Pillar 2 Requirement (P2R) is a bank-specific capital requirement which applies in addition to, and covers risks which are underestimated or not covered by, the minimum capital requirement (known as Pillar 1). The P2R is binding and breaches can have direct legal consequences for banks.

What is the focus of Pillar 2 of Basel II?

The Pillar 2 supervisory review process is an integral part of the Basel Framework. It is intended to ensure that banks not only have adequate capital to support all the risks in their business but also develop and use better risk management techniques in monitoring and managing these risks.

What is Pillar 2 Icaap?

It is driven by the bank’s Internal Capital Adequacy Assessment Process (ICAAP), and the PRA’s review of that ICAAP. The main purpose of Pillar 2 is to address any firm specific risks that are not adequately covered by Pillar 1, and ensure that sufficient capital against those risks.

What is Pillar 3 disclosure?

Pillar 3 requires firms to publicly disclose information relating to their risks, capital adequacy, and policies for managing risk with the aim of promoting market discipline.

What is pillar 2A?

Pillar 2A requires banks to hold extra prudential capital over and above the Pillar 1 amounts held for credit, market and operational risk, for instance against concentration risk, counterparty risk and interest rate risk in the banking book.

What is the focus of Pillar 3 of Basel II?

The aim of Pillar 3 is to allow market discipline to operate by requiring institutions to disclose details on the scope of application, capital, risk exposures, risk assessment processes, and the capital adequacy of the institution.

Which risk is part of Pillar 2?

Credit risk For more sophisticated banks, the credit review assessment of capital adequacy, at a minimum, should cover four areas: risk rating systems, portfolio analysis/aggregation, securitisation/complex credit derivatives, and large exposures and risk concentrations.

Who is responsible for Pillar 2 of Basel II?

Under Pillar 2, banks are obligated to assess the internal capital adequacy for covering all risks they can potentially face in the course of their operations. The supervisor is responsible for ascertaining whether the bank uses appropriate assessment approaches and covers all risks associated.

What do you need to know about pillar 2A?

Pillar 2A. Banking – regulation. (P2A). Pillar 2 is the aspect of banking supervision which addresses firm-wide governance and risk management, among other matters. Pillar 2A addresses risks to an individual firm which are either not captured, or not fully captured, under the Pillar 1 capital requirements applicable to all banks.

What are the three components of Basel 2?

Basel II is the second set of international banking regulations defined by the Basel Committee on Bank Supervision (BCBS). It is an extension of the regulations for minimum capital requirements as defined under Basel I. The Basel II framework operates under three pillars: Capital adequacy requirements, Supervisory review, and Market discipline.

What is the minimum capital requirement in Basel 2?

As per Basel 2, the minimum capital requirement is 8% of the risk-weighted assets. Regulations are of no use if proper supervision is not done.