Newsletter July/Aug 08: Tough trading book rules proposed to beat crises

BASEL – Tough new rules are being proposed by regulators on the Basel Committee to ensure banks properly safeguard in future against the kind of trading risks that exacerbated the year-old global financial crisis. Under guidelines issued in a mid-July consultation paper,* the more sophisticated banks that model risks in their trading book will have to capture a wider range of such risks – risks not captured in their conventional Value-at-Risk (VaR) models and referred to by the Basel Committee as “incremental” risks.