The Basel II framework: the role and implementation of Pillar 2.

Discussions on the reform of the “Basel I” capital ratio, or “Cooke” ratio, which dates from 1988, were initiated in the late 1990s under the aegis of the Basel Committee. They culminated in June 2004 with the publication of a new Accord on international convergence of capital measurement and capital standards, commonly referred to as “Basel II”. The new Accord was updated in November 2005 to incorporate several technical additions. The Basel II framework is designed to permit a more risk-sensitive and more comprehensive coverage of banking risks. It consists of three complementary and mutually reinforcing “pillars”. Pillar 1 consists of the basic minimum capital requirements. Pillar 2 introduces the principle of a structured dialogue between banking institutions and supervisors. Pillar 3 is focused on transparency and market discipline. Each of these three pillars represents a major innovation, marking the transition from a prudential framework based on simple quantitative rules to a more complete set of standards which, in addition to using a more risk-sensitive quantitative approach, incorporates qualitative principles that institutions are expected to comply with. However, Pillar 2 has a unique characteristic that distinguishes it from the other two Pillars. It reaffirms and provides a rationale for the existing practice of many supervisors: conducting a quantitative and qualitative review of all risks using their own tools but also the processes for risk monitoring developed by banks themselves. These reviews may lead to various supervisory measures, including the imposition of additional capital requirements under Pillar 2. The extensive consultations conducted in the past few years between supervisors and the banking industry have gradually led to the implications of Basel II being taken on board by all of the parties concerned. First of all, institutions focused on adapting their information systems to the requirements laid down in Pillar 1. For a long time, Pillar 2 was the least commented on part of the Basel reform. However, the entry into force of the new ratio will take place from the beginning of 2007 –in France as in the other countries of the European Economic Area– since the transposition of the Accord into Community law has taken the form of a new Capital requirements directive (CRD). In the run-up to this deadline, Pillar 2 has become a major topic of discussion between banks and their supervisors, and it therefore seems opportune to further clarify how the Commission bancaire will implement Pillar 2. In particular, the cross-border implementation of the new framework raises many questions, to which European supervisors have responded by developing rules that are as harmonised as possible. Beyond these considerations, thought needs to be given to the fundamental purpose of Pillar 2 and to its practical implementation. The increased risk-sensitivity of capital requirements under Pillar 1 undeniably represents a major advance, but it results in increased correlation of capital requirements with the business cycle, the degree of which will be specifi c to each institution. From the perspective of micro and macro-prudential stability, the fl uctuations in the regulatory ratio that might result from this correlation must be understood and, if possible, kept in check. This article seeks to show how this objective could be achieved through a possible approach to Pillar 2 involving the putting in place of a capital cushion in addition to the regulatory minimum.

Financial stability and the New Basel Accord.

This study outlines how proposed changes to international capital adequacy standards – commonly referred to as “Basel II” – will reinforce financial stability. Basel II is designed to contribute to the prevention of individual bank failures by making minimum capital standards more flexible and aligning them more closely with actual risks and changes in the level of risk. By bringing regulatory capital closer to the concept of economic capital that banks use in their internal management, and by going to the core of banks’ financial information systems, the proposed changes will foster better control of risks. By reducing credit disruptions, the changes should help to limit the severity of macro-economic and sectoral downturns and thereby improve financial stability. Concerns have been expressed about the potential “procyclicality” of the new standards, and the possibility of sharp swings in regulatory capital requirements leading to dramatic shifts in the availability of credit. These concerns, while theoretically appealing, do not appear warranted in practice. The Basel Committee took steps early on to ensure that cyclical effects would be moderated, while still achieving the goal of making capital ratios more risk-sensitive, more closely related to the bank’s management of its “risk-return” tradeoff, and therefore more useful as an internal control tool. In contrast with Basel I, which is external to banks’ methods of management, Basel II incorporates an advanced IRB approach. It can therefore figure as a central element in banks’ strategic planning. The success of the proposed changes will depend on how they are applied by bank managers and on the vigilance of bank supervisors in overseeing their implementation. Numerous contacts and on-site examinations carried out to date are encouraging in this regard. A hoped-for reform in the rules on provisioning, consistent with the new capital standard – factoring in ex ante the impact of expected but unrealized credit losses over the credit cycle instead of concentrating them at the lowest point of the cycle – would contribute significantly to financial stability.

Aide au dimensionnement de l'exploitation de marbre en carrières souterraines par modélisation numérique

National audienceCe travail s'inscrit dans le cadre d'un programme européen dont l'objectif était de développer un savoir-faire pour le dimensionnement des exploitations de marbre en carrière souterraine. Nous avons étudié l'impact de la fracturation sur la rentabilité et la sécurité des chantiers. Le logiciel RESOBLOK, développé par PINERIS au sein du LAEGO, a été utilisé pour simuler la fracturation du milieu de façon déterministe ou statistique à partir d'une mesure adéquate de ces caractéristiques in situ, puis pour améliorer la rentabilité des exploitations en déterminant la géométrie des travaux (orientation des galeries, choix des extensions) qui maximise la taille des blocs récupérés et minimise le coût du renforcement nécessaire par garantir la sécurité des chantiers

Nonlinear mechanical and poromechanical analyses : comparison with analytical solutions

International audienceThe validation of computational schemes for modelling multiphysic phenomena in porous geomaterials is a key importance in geoenvironmental applications. This paper focuses on the vadiation of nonlinear and coupled hydromechanical schemes by comparing the results of numerical predictions performed with COMSOL and the mathematical solutions. Firstly, we simulate the nonlinear mechanical behaviour of rock mass around a deep cylindrical hole. The second example treats on the simulation of the well-known one-dimensional consolidation of a column of saturated porous rock. Finally a validation of poroelastic calculations based on the drainage of a cylindrical hole in porous media is achieved by comparison to an existing analytical solution

Vol. 32, No. 3, pp 272-324

Joël Thoraval, maître de conférencesÉlisabeth Allès, chargée de recherche au CNRS Anthropologie en Chine : théories et terrains Regroupant une majorité d’étudiants en master ou en cours d’études doctorales, le séminaire de cette année a été conçu sous forme d’atelier organisé en commun avec les participants autour d’une réflexion associant terrains et théories nouvelles dans l’anthropologie du monde chinois. Deux grands thèmes ont été choisis, l’ethnicité et le religieux. Dans chaque cas, on ..

Effets prévisibles en surface et traitement de galeries minières creusées à faible profondeur dans les grès vosgiens

17 pages et 7 figuresNational audienceThe conditions of the stability of the drifts excavated in the Vosges sandstones, that might be modified by overburden weakening and/or flooding of drifts, have been analysed. The effects of potential instabilities on the surface level have also been quantified. In the worst case, the performed analysis predicts formation of a sinkhole at soil surface only if the drifts are very close to the surface and in case the mechanical properties of the sandstones and those of natural discontinuities are very poor. Beyond eight meters of depth, evolution of collapse arch is stopped prior to reaching soil surface, as a matter of dilatancy of collapsed strata. The “Houillères du Bassin de Lorraine” uses these results for safety assessment of the drift belonging to mining infrastructure such as old drift FALCK driven in 19th century for water seepage

3D simulations of an injection test done into an unsaturated porous and fractured limestone

We have developed a numerical model to represent the effect of injection test in unsaturated porous and fractured rock mass. The test was conducted at the LSBB (Laboratoire Souterrain à Bas Bruit) site close to Rustrel, Vaucluse, France in the field of the French ANR project called 'HPPP-CO2'. The results underline the impact of fractures on the hydro-mechanical response of the rock mass. Indeed fractures allow a faster dissipation of the water pressures and stress variations induced by the water injection. Back analysis lead us to also estimate the rock mass intrinsic permeability and compressibility of the injected laye

Interprétation d'essais dilatométriques réalisés dans un pilier abandonné par modélisation numérique

International audienceDilatometer tests were carried out in an abandoned pillar of a Lorraine iron basin to characterize the in situ iron ore. Modules of deformability and their variability were determined using the traditional approach. A more comprehensive interpretation, based on numerical modeling and inverse methods, made it possible to estimate the strength properties of the in situ iron ore.Des essais dilatométriques ont été réalisés dans un pilier abandonné du bassin ferrifère lorrain dans le but de caractériser le minerai de fer in situ. Les modules de déformabilité et leur variabilité ont été déterminés par l'approche classique. Une interprétation plus complète, basée sur la modélisation numérique et la méthode inverse, a permis d'estimer les caractéristiques de résistance du minerai de fer in situ