Risk Management in Credit Portfolios Concentration Risk and Basel II
Risk concentrations play a crucial role for the survival of individual banks and for the stability of the whole banking system. Thus, it is important from an economical and a regulatory perspective to properly measure and manage these concentrations. In t
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Martin Hibbeln
Risk Management in Credit Portfolios Concentration Risk and Basel II
Dr. Martin Hibbeln Technische Universita¨t Braunschweig Institute of Finance Carl-Friedrich-Gauß-Faculty Abt-Jerusalem-Str. 7 38106 Braunschweig Germany [email protected]
ISSN 1431-1933 ISBN 978-3-7908-2606-7 e-ISBN 978-3-7908-2607-4 DOI 10.1007/978-3-7908-2607-4 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2010934306 # Springer-Verlag Berlin Heidelberg 2010 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: SPi Publisher Services Printed on acid-free paper Physica‐Verlag is a brand of Springer‐Verlag Berlin Heidelberg Springer‐Verlag is a part of Springer Science+Business Media (www.springer.com)
Foreword
Over the last 10 years, there has hardly been a topic that has occupied the credit sector more than the appropriate determination of the capital backing of credit risk positions. Even after the adoption of the capital requirements by the Basel Committee on Banking Supervision “Basel II” in June 2004, the great relevance of this topic is still present because many types of banking risk are not taken into account. The importance of such risk types is also recognized within the framework of Basel II. According to Pillar 2, “there are three main areas that might be particularly suited to treatment: risks considered under Pillar 1 that are not fully captured by the Pillar 1 process (e.g. credit concentration risk); those factors not taken into account by the Pillar 1 process (e.g. interest rate risk in the banking book, business and strategic risk); and factors external to the bank (e.g. business cycle effects)”. In this context especially the consideration of concentration risks is a very important task since concentration risks in mortgage banks can be seen as one relevant cause of the financial crisis. Against this background, Martin Hibbeln has set himself the targets of analyzing concentration risks in detail and of consistently integrating concentration risks into the Basel II model. First, the author deals with regulatory principles of the European Banking Supervision, which have to be considered in the framework of co
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