Risk management and Pillar II: implementing ICAAP in Italian credit cooperative banks

Rosaria Cerrone () and Michele Maria Madonna ()
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Rosaria Cerrone: University of Salerno, http://www.unisa.it/
Michele Maria Madonna: University of Salerno, http://www.unisa.it/

Journal of Financial Transformation, 2012, vol. 35, 71-80

Abstract: We want to show the relevance of risk management and riskbased functions in banks, as during the recent crisis what has become very clear is that capital requirements for financial institutions were not always adequate given their risks. Under the current set of rules the Internal Capital Adequacy Assessment Process (ICAAP) is a requirement for banks and is necessary to measure the principal risks that each bank must afford and manage. So we first consider the role, functions and requirements of the ICAAP. Banks often tend to calculate the capital buffer they hold by extrapolating figures from previous events, instead of using a forecast risk profile. Using its particular scheme the ICAAP should provide firms with the best capital buffer required, and the best level of funds from stockholders. For this reason we present an overview of the ICAAP methodology and results. In particular we consider the case of credit cooperative banks in Campania, by taking into account their ICAAP schemes and the effects of these new rules and this kind of self-regulation.

Keywords: ICAAP; risk management; capital requirements; Pillar II (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1529

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