Basel II and Capital Requirement for Credit Risk in Brazil

Márcio Holland () and Guilherme Yanaka ()
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Guilherme Yanaka: Banco Central do Brasil

Brazilian Review of Finance, 2010, vol. 8, issue 2, 167-195

Abstract: With the implementation of Basel II Accord in Brazil, the largest banks will be allowed to use the so-called IRB (Internal Ratings Based) model to compute the credit risk capital requirement. The aim of this work is to measure the difference between the minimum capital requirement (and, thus, in the capital ratio) calculated through the IRB approach and the one defined by the current regulation. Estimates of probabilities of default (PD) were made using transition matrices constructed from the Brazilian Central Bank Credit Register (SCR) data. The results show an increase in the capital requirement, contrary to what have happened in the G-10 countries.

Keywords: Basel II; credit risk; transition matrix; banking regulation; Basel II; credit risk; transition matrix; banking regulation (search for similar items in EconPapers)
JEL-codes: G18 G21 G32 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:8:y:2010:i:2:p:167-195

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