Regulatory Alerts2012-03-22
Market Risk
The Supervisor of Banks defines market risk as losses from market price movements and outlines capital adequacy requirements for banking corporations' on and off-balance-sheet positions. This directive applies capital charges to interest rate-related instruments, equities in the trading book, and foreign exchange risk, allowing for either a standardized measurement method or an internal models approach subject to approval. Banking corporations must adhere to strict policies for trading book eligibility, active position management, continuous risk monitoring, and consolidated reporting, while also addressing counterparty credit risk for trading book transactions.
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