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This study introduces a novel capital allocation mechanism for banks, using game theory to assign capital requirements while enforcing macro-prudential standards. Based on competition for lower requirements, the approach employs insensitive risk measures from Chen et al. (2013) and Kromer et al. (2016), typically yielding a unique Nash allocation rule, while sensitive measures from Feinstein et al. (2017) may need additional conditions for uniqueness. The Eisenberg-Noe (2001) clearing system is analyzed for systemic risk, with numerical Nash allocations demonstrated. The study claims that further investigation into properties like continuity, monotonicity, or convexity is needed, noting that not all can hold simultaneously due to firm interactions.

“This update is based on the EBA reporting framework version 4.0 and covers indicators on institutions' profitability, solvency and operational risk, among others. The update also includes a new sets of risk indicators laid down in the Banking Package (Capital Requirements Regulation and Capital Requirements Directive - CRR3/CRD6), indicators related to Environmental, Social and Governance (ESG), and those already used in the context of the Minimum Requirement for Own Funds and Eligible Liabilities (MREL).”

EIOPA highlights the lack of consistent regulatory treatment for crypto assets in the (re)insurance sector, raising concerns about risk sensitivity. Current capital weight options may underestimate crypto risks. To ensure prudence, EIOPA proposes a uniform 100% capital requirement for all crypto holdings. This approach balances risk management with simplicity while acknowledging that future market growth may require revisions. A review of crypto treatment under Solvency II is recommended as the sector evolves.

The report assesses regulatory capital requirements, leverage ratios, liquidity metrics, and the implementation of total loss-absorbing capacity (TLAC) standards.It provides insights into the banking sector's resilience and the effectiveness of Basel III reforms.Detailed analyses and underlying data are provided.

The EBA published final draft ITS amending rules for internal model authorization under CRR, reflecting the EU Banking Package. Key changes include removing the use of internal models for operational risk (deleting AMA references) and updating references to supervisory college regulations. These ITS are based on CRR III amendments.

The ECB has decided to keep capital requirements largely unchanged for 2025 due to the strong performance of banks. However, specific banks will face additional capital requirements due to insufficient provisioning for non-performing loans and high exposures to leveraged loans. The ECB emphasized the need for banks to address governance, risk management, and operational resilience, particularly in light of macroeconomic threats and digital transformation challenges.

#insurers have discretion to determine #solvencyii #capitalrequirements. We find that long-term guarantees measures substantially influence the reported solvency ratios. The measures are chosen particularly by less solvent insurers and firms with high interest rate and credit spread sensitivities. Internal #models are used more frequently by large insurers and especially for #risks for which the firms have already found adequate immunization strategies.

The paper explores the potential inclusion of #climatechange #risks in the #prudential #regulatoryframework, specifically discussing adjustments to #capitalrequirements and changes to the #riskmanagement and #governance framework. The paper argues in favor of the latter but is more cautious regarding the former.

This paper examines the use of #machinelearning methods in the context of #banks' #capitalrequirements, specifically the internal Ratings Based (#irb) approach. The authors discuss the advantages and risks of using machine learning in this domain, and provide recommendations related to #risk parameter estimations, #regulatory capital, the trade-off between performance and interpretability, international #banking competition, and #governance, #operationalrisk, and training.

" The biggest Shortcoming of the recent reforms to the stabilization of the #financialsystem, such as #baseliii and the American #doddfrankact Act, is that they increase the #capitalrequirements rather than the causes of the increased #risk. It would generally be better to forbid risky and complex #financialproducts than to further increase #regulation complexity."