Basel II Compliance and Risk Management Analysis: Calculating Economic Capital
 

Economic capital (EC), the amount of capital that an organization must set aside to offset potential losses, is a key metric for many European banks and financial institutions. It is also a central requirement of Pillar 2 of the Basel II regulatory framework. While Capgemini and many of its clients view EC as the best measure of risk inherent in a portfolio, calculating EC is not a straightforward analytical exercise. Portfolios heavily weighted in a particular sector, for example, carry a significant amount of concentration risk, complicating EC analysis.

2010-03-08 07:00 AM


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