ICAAP Implementation in Austria’s Major Banks

Elisabeth Woschnagg ()
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Elisabeth Woschnagg: Oesterreichische Nationalbank

Financial Stability Report, 2008, issue 16, 96-107

Abstract: While Pillar 1 of the regulatory capital framework Basel II stipulates capital requirements for credit, market and operational risk, Pillar 2 focuses on the economic and internal perspective of banks’ capital adequacy. To ensure capital adequacy, banks are required to have an Internal Capital Adequacy Assessment Process (ICAAP) in place that enables them to identify, measure and aggregate all material risk types and calculate the economic, or internal, capital necessary to cover these risks. In addition to this, banks should actively manage their overall risk profile. The ICAAP is essential to the preservation of financial stability and will be subject to a higher degree of supervisory scrutiny in the near future. Under the principle of proportionality, requirements for the ICAAP are in line with banks’ specific characteristics and business models. As a result, a variety of approaches is in use. This paper provides a summary of the information Austria’s eight largest banks (in terms of systemic importance) have to date published on this subject (e.g. annual reports and specific documents in line with disclosure requirements).

Keywords: capital adequacy; risk-bearing capacity; economic capital; Basel II; Pillar 2; ICAAP; large Austrian banks; risk management (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2008
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