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March 2018 (published: 28.03.2018)
Number 1(32)
Home > Issue > The importance of economic capital model in estimation of bank capital
Posnaya E.А. , Kolesnikov A.M.
The article reveals the content of economic capital concept, explores approaches to its estimation, assesses the implementation of economic capital concept in the national banking system, identifies problems, possible directions for development and convergence of the Russian approach with international requirements. As a result, the need to apply the model of economic capital in estimation of bank capital is substantiated. The change in trends in bank regulation (the actions of supervisors in matters of capital adequacy acquired a risk-oriented nature that takes into account the risks assumed by each bank and the quality of their management) led to the emergence in 2004 of the concept of economic capital reflected in the document "International Convergence of Capital Measurement and standards of capital: new approaches"(Basel II). According to this concept, commercial banks must have sufficient capital to cover not only credit, market, but also operational risks. Thus, economic capital takes into account all the risk circumstances that a bank institution may have. The need to apply the method of economic capital in bank capital estimation is justified and significant.
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Keywords: economic method; bank capital; estimation of bank capital; risk; profit.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 336.71
The importance of economic capital model in estimation of bank capital
The article reveals the content of economic capital concept, explores approaches to its estimation, assesses the implementation of economic capital concept in the national banking system, identifies problems, possible directions for development and convergence of the Russian approach with international requirements. As a result, the need to apply the model of economic capital in estimation of bank capital is substantiated. The change in trends in bank regulation (the actions of supervisors in matters of capital adequacy acquired a risk-oriented nature that takes into account the risks assumed by each bank and the quality of their management) led to the emergence in 2004 of the concept of economic capital reflected in the document "International Convergence of Capital Measurement and standards of capital: new approaches"(Basel II). According to this concept, commercial banks must have sufficient capital to cover not only credit, market, but also operational risks. Thus, economic capital takes into account all the risk circumstances that a bank institution may have. The need to apply the method of economic capital in bank capital estimation is justified and significant.
Read the full article
Keywords: economic method; bank capital; estimation of bank capital; risk; profit.
DOI 10.17586/2310-1172-2018-11-1-113-118