7d1. Basel II Capital Adq.
- Thread starter lkuo
- Start date
Not stupid, i confused myself while recording 
(My example, btw, elaborates on Jorion's example in the handbook)
You'll notice "Available Capital:" that's what the bank actually has
e.g., 600 Tier 3 except that all 600 is not eligible because it's for market risk only. So only 250 of 600 Tier 3 is elibigle.
But the entire $900 available Tier 1 is eligible (so the 900 is just an input here). Unlike Tier 2 and Tier 3, all of Tier 1 is eligible since Tier 1 is high quality buffer. For example, if this bank had $1,600 in Tier 1, it could be used for everything and no Tier 2 or 3 needed. Eligibility restrictions only apply to Tier 2 and Tier 3
David
(My example, btw, elaborates on Jorion's example in the handbook)
You'll notice "Available Capital:" that's what the bank actually has
e.g., 600 Tier 3 except that all 600 is not eligible because it's for market risk only. So only 250 of 600 Tier 3 is elibigle.
But the entire $900 available Tier 1 is eligible (so the 900 is just an input here). Unlike Tier 2 and Tier 3, all of Tier 1 is eligible since Tier 1 is high quality buffer. For example, if this bank had $1,600 in Tier 1, it could be used for everything and no Tier 2 or 3 needed. Eligibility restrictions only apply to Tier 2 and Tier 3
David
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