Basel Readings - How to cope with them?

[Johnny Firpo]

Hi,
actually I am a bit concerned how to cope with the Basel readings assigned, as these papers contain more than 600 pages. Based on the exam and preparation experience so far and to the best of your knowledge:

1. Do we have to read all the papers in detail or are there any parts than can be omitted? (Given the timeframe even in the GARP Preparation Handbook I can't imagine how anyone should read all of this - and understand all of this - within one week...). Especially the first reading contains 347 pages...

2. Are the BT Study Notes enough to prepare for the exam?

3. Are there any Practice Questions or can we expect PQ on these readings?

4. How many questions can we expect on these Basel readings in the exam? (Considering that Operational Risk incl. the Basel Readings is 25%: the total number of questions expected for Operational and Basel would be 20).

5. Any further hints how to successfully cope with the Basel readings?

Many thanks in advance!

 

[WiseSnail]

I too am quite curious about this. Can anyone offer insight on the best way to tackle this portion of the curriculum? On the surface, looking solely at the volume of the Basel readings, they appear quite daunting . . .

 

[inik]

likewise, i have the same questions.

 

[Johnny Firpo]

I know times are very busy. But some advice concerning this topic would be very much appreciated!
Thx!

 

[IRENA BLAZINCIC]

1. “Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework—Comprehensive Version,”(Basel Committee on Banking Supervision Publication, June 2006).
Study notes and Questions AVAILABLE


2. “Revisions to the Basel II Market Risk Framework—Updated as of 31 December 2010,” (Basel Committee on Banking Supervision Publication, February 2011).
Study notes and Questions AVAILABLE


3. “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems—Revised Version,” (Basel Committee on Banking Supervision Publication, June 2011).
Study notes and Questions AVAILABLE

4. “Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools,” (Basel Committee on Banking Supervision Publication, Jan 2013).

Study notes and Questions NOT AVAILABLE - don't know why? - this was assigned reading in 2012 and 2013

5. “Operational Risk—Supervisory Guidelines for the Advanced Measurement Approaches,” (Basel Committee on Banking Supervision Publication, June 2011).

Study notes ONLY


6. Nadine Gatzert, Hannah Wesker, “A Comparative Assessment of Basel II/III and Solvency II,” Working Paper, Friedrich-Alexander- University of Erlangen-Nuremberg, Version: October 2011.

37 pages - I will read this

 

[IRENA BLAZINCIC]

Davide, Nicole

I cannot find study notes or questions for reading:
Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools

This is old reading (it was assigned in 2012 and 2013).

thx

 

[David Harper CFA FRM]

Hi @irenab

Thanks for the above (helpful) list .

Actually, R62 is new to 2014; e.g., FRM Study Guide Changes:

OPERATIONAL AND INTEGRATED RISK MANAGEMENT
Additions:

1. “Principles for Effective Data Aggregation and Risk Reporting,” (Basel Committee on Banking Supervision Publication, January 2013).
2. “Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools,” (Basel Committee on Banking Supervision Publication, January 2013)

I have a good draft of R62 but it needs an edit and I committed to finishing the T9 current issues this week. I'l get it posted as soon as possible. Practice question wise, I just finished a new T8 Global Topic review (with today's question) so I switch to a new set of basel questions, but that will transome the exam so really is more looking forward to Nov exam. Thanks,

 

[IRENA BLAZINCIC]

Thx. I see now. 2013 reading on Basel and liquidity was:
“Basel III: International Framework for Liquidity Risk Measurement, Standards and Monitoring,” (Basel Committee on Banking Supervision Publication, December 2010).

This is deffinitely not the same as 2014 reading

 

[Alex_1]

1. “Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework—Comprehensive Version,”(Basel Committee on Banking Supervision Publication, June 2006).
Study notes and Questions AVAILABLE

2. “Revisions to the Basel II Market Risk Framework—Updated as of 31 December 2010,” (Basel Committee on Banking Supervision Publication, February 2011).
Study notes and Questions AVAILABLE


3. “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems—Revised Version,” (Basel Committee on Banking Supervision Publication, June 2011).
Study notes and Questions AVAILABLE

4. “Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools,” (Basel Committee on Banking Supervision Publication, Jan 2013).

Study notes and Questions NOT AVAILABLE - don't know why? - this was assigned reading in 2012 and 2013

5. “Operational Risk—Supervisory Guidelines for the Advanced Measurement Approaches,” (Basel Committee on Banking Supervision Publication, June 2011).
Study notes ONLY


6. Nadine Gatzert, Hannah Wesker, “A Comparative Assessment of Basel II/III and Solvency II,” Working Paper, Friedrich-Alexander- University of Erlangen-Nuremberg, Version: October 2011.
37 pages - I will read this

Hi @irenab , I have started reading “A Comparative Assessment of Basel II/III and Solvency II” (actually only made it past the introduction ) and planned to write a short summary just to get a grip on it, but due to time reasons I didn't manage to do this. Have you by any chance read the article by now? Just from a subjective point of view, I thought it could make sense to compare if we have a similar understanding.

I think I will concentrate on the pages 28-32 ("Summary of main differences..." and "Conclusion") for time reasons in order to retain the most important facts. Or do you think there is something crucial before page 28 which should be remembered (as I said, I am aware that this is subjective, as everybody learns differently, but I am somehow struggling to cover the remaining new readings...)

Thanks and best regards,
Alex

 

[IRENA BLAZINCIC]

hi @Alex_1
actually I have read only first 13 pages... I think I will finish it tommarow.
key ideas:

• Solvency has more holistic approach (Basel treats each risk individually: market, credit, operational, liquidity)
• same structure as Basel (three pillars),
• Basel aims to protect banking system from systematic risk, while Solvency aims to protect policyholders...
• Solvency confidence level 99,5% for the commpany as whole
• number of risk classes: basel: 3 +1; solvency: 6
• capital requirement: Solvency - two-level approach (target capital and minimum capital)

 

[IRENA BLAZINCIC]

@Alex_1 , I have finished reading.

AIM• Differentiate between solvency capital requirements (SCR) and minimum capital requirements (MCR), and describe the repercussions to an insurance company for breaching the SCR and MCR under the Solvency II framework.

SCR –solvency capital requirement: desired, “target capital
MCR – minimum capital requirement
Breaching SCR: company is granted 6 mths (plus further 3 mths) – to comply with SCR
Breaching MCR: supervisor revokes company’s licence

For all other AIM's, I think it is usefull to review Tables 1 - 4, because those could be easilly mapped to AIMs.
For example:
AIM• Explain the difference between Basel II/III and the Solvency II frameworks with respect to: 1) risk classes and capitalrequirements, 2) risk measure and calibration, 3) time perspective, and 4) valuation.
Table 1: Criteria 1-3 and 6

 

[Alex_1]

Hi @irenab , great, many thanks for the information and for the hints!! I've only reviewed part 1 topics today, tomorrow I planned to look at the Basel III: Liquidity coverage ratio... reading and revise Operational risk topics in general, if I somehow manage it to sum the main points of the paper (although there are roughly 70 pages...) I'll post it in the forum... Best regards, Alex

 

[Deepak Chitnis]

Hi @David Harper CFA FRM, as in 2016 in FRM Part2 study guide of GARP, they have noted that
Optional Regulatory Readings for Reference
Candidates are expected to understand the objective and general structure of important international
regulatory frameworks and general application of the various approaches for calculating minimum capital requirements,
as described in the readings above. Candidates interested in the complete regulatory framework
can review. Does that means we may not expect a question on that additional 5 readings. I have seen there are deep study notes of yours and also great question set, but for exam point of view reading them one time will sufficient? Or GARP expect us to go deep. Whats your opinion about it?
Thank you!

 

[David Harper CFA FRM]

HI @Deepak Chitnis I think I would interpret GARP literally on this point, because their history supports this approach: the detailed Basel syllabus embedded in the actual BIS framework documents was, in general, always too comprehensive for the exam format. In other words, I read this statement from them (which you copied above) and it sounds petty much like their historical treatment. If you look at the LOs which are itemized in Hull's Chapters, it's already quite a lot of detail, so I really would only worry about those in terms of "what is required?" I hope that is helpful!

 

[Deepak Chitnis]

Thank you @David Harper CFA FRM, I think I will read your notes and question set of basel atleast once. Thanks again!

 

[Kavita.bhangdia]

HI David,
Regarding capital requirement calculations, their are lots of tables ( say different RWA weights for different bond ratings with different maturities).

More over we have numerical limits on equity, Tier 1, Tier 2 capital etc etc.. Are we supposed to remember those figures?
Thanks,
Kavita

 

[ABSMOGHE]

Hi @David Harper CFA FRM


My question is similar to the one posted by the user "Kavita.bhangdia" as can be seen above this post. In terms of limits and formulas, what all are we supposed to memorize ? For instance is it really necessary to memorize the risk weights for different bonds as given in the Basel II ? Or is it the case that the percentages would be provided to us ?
Thanks.

 

[Nicole Seaman]

Hi @David Harper CFA FRM


My question is similar to the one posted by the user "Kavita.bhangdia" as can be seen above this post. In terms of limits and formulas, what all are we supposed to memorize ? For instance is it really necessary to memorize the risk weights for different bonds as given in the Basel II ? Or is it the case that the percentages would be provided to us ?
Thanks.

Hello @ABSMOGHE

David or another member may have a more detailed answer for you, but I wanted to weigh in a bit because questions about which formulas and concepts to memorize have been asked many times. HERE is one example of an answer I provided on another thread:

"I sent this question to GARP, however, FRM candidates can email GARP members services themselves to ask questions like this. We really don't know the answers to these questions regarding exactly what can be expected on the exam, so it would be best for members to email them directly to get an accurate answer. Our best answer to these types of questions is that we really don't know. We aren't directly affiliated with GARP, and we do not ever see the actual exams. We prep all of our materials according to the study guide that GARP provides to us, which is the same study guide that is provided to FRM candidates. So, we really do not have any more insight about what is actually realistic for the exam. Generally, we tell our members that they should assume that any concepts listed in the learning objectives should be studied and learned in-depth. We do our best to prepare our members according to the curriculum that is provided by GARP. Any questions like this should be directed to [email protected] so they can answer questions about the exam. "

Although that thread was regarding a question about end of chapter Q&A, my response still pertains to the root question that many members have: "How will this be tested on the exam, and what do we have to memorize". I know this doesn't answer your question specifically, but I hope that it helps our members to understand that sometimes we really don't know exactly what GARP expects you to memorize and what will be on the exam.

Nicole

 

[Lianakh]

Hi, I am new to bionic turtle and I am wondering where I can see these "assigned" readings. Thanks in advance

 

[Nicole Seaman]

Hi, I am new to bionic turtle and I am wondering where I can see these "assigned" readings. Thanks in advance

Hello @Lianakh

These readings are located in Topic 7: Operational and Integrated Risk Management in the FRM curriculum. Our study planner follows the same order as the GARP curriculum so that is where you can view the materials associated with these readings. GARP provides the actual source readings on their website here: https://www.garp.org/#!/frm/study-materials. I hope this helps!