Risk position

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In banking, risk positions are all asset items ( assets ) and off-balance sheet items that are to be backed with own funds .

General

In order to reduce the risks in the banking sector, banking supervisory law tries to limit the risks associated with banking operations by setting quotas. The applicable until December 2006 Principle I and Principle Ia prepared for this purpose, the liable equity capital of a bank 's "risk weighted assets" ( English Risk-weighted assets , RWA ) against. These were made up of “balance sheet assets” (which were to be reported at their nominal values or book values ) and “off-balance sheet business” (for which the replacement costs or credit equivalents were applied as a value convention ). The “weighted risk assets” determined in this way could not exceed 12.5 times the liable equity. As of January 2007, the Solvency Regulation (SolvV) regulated this connection and divided the risk-weighted assets into exposure classes .

It turned out that the years before the outbreak of the financial crisis from 2007 onwards were marked by excessive growth in the risk positions of institutions in relation to their own funds. During the financial crisis, institutions were forced to reduce these risk positions significantly in the short term due to losses and refinancing problems. This exacerbated the drop in asset prices and led to further losses for banks, so that their own funds continued to decrease. Because of this negative spiral, there was a credit crunch in the real economy , from which an extensive economic crisis developed.

These experiences led to a fundamental change in banking supervision law. As of January 2014, the SolvV was replaced by Regulation (EU) No. 575/2013 (Capital Adequacy Regulation) (CRR), which is applicable in all EU member states , and which once again brought some modifications. The former risk-weighted assets are now called risk position. As before, risk-free balance sheet items such as cash on hand do not need to be backed with own funds (Art. 134 (3) CRR). According to Art. 119 Para. 4 CRR, the minimum reserves are given the same risk weight as other claims against the central bank , so they do not have to be backed by own funds.

Determination of risk positions

The starting point is the most important balance sheet items for most credit institutions, “ Receivables from customers” and “Receivables from credit institutions” ( bank loans ), i.e. the lending business . 

   Forderungen an Kunden und Kreditinstitute
   + Bestand an Schuldverschreibungen
   + Bestand an Aktien
   + Sachanlagevermögen
   + sonstige Vermögensgegenstände
   = bilanzielle Adressenausfallrisiko­positionen

These balance sheet risk positions are shown at their book value in accordance with Art. 166 Paragraph 1 CRR . The additional addition does not differentiate between fixed assets and current assets , but includes all assets on the bank's balance sheet . Based on the subtotal of the "balance sheet counterparty default risk positions", the following additions are now required: 

   Bilanzielle Adressenausfallrisikopositionen
   + außerbilanzielle Adressenausfallrisikopositionen
   + derivative Adressenausfallrisikopositionen
   + Vorleistungsrisikopositionen (Art. 379 CRR)
   = Kreditrisiko­positionen

Off-balance sheet counterparty default risk positions are calculated in accordance with Art. 111 CRR in conjunction with Annex I CRR. This also includes irrevocable loan commitments that have not yet been used , which - depending on the risk level - are to be offset between 10% and 50%. In the case of loan commitments that a bank can terminate unconditionally and without notice at any time, or that automatically result in a loan being terminated if the borrower's creditworthiness deteriorates, a conversion factor of 0% applies in accordance with Art. 166 (8a) CRR .

According to Art. 113 CRR, risk positions that have already been deducted from own funds no longer need to be taken into account in the risk positions. According to Art. 94 Paragraph 1 No. 2a CRR (or Section 12 Paragraph 1 No. 3 and 4 GroMiKV ), derivatives are credited at their market price or book value. According to Art. 332 (1) CRR, the nominal value of the credit derivative must be used as the basis for calculating the capital requirement for the general and specific risk of the protection seller . The protection seller may, however, replace the nominal value with the nominal value plus the change in the net market value of the credit derivative since the transaction was concluded, so that from the protection seller's point of view, a net decrease in value has a negative sign (Art. 332 (1) sentence 2 CRR). According to Art. 332 (2) CRR, this also applies in reverse for the protection buyer .

Were letters of credit , (8b CRR 166 Abs. Art.) Are with 20% Note Issuance facilites (NIFs), and revolving Underwritung Facilities (RUFs) with 75% (Art. 166, para. 8d CRR) recognize their nominal value, otherwise apply to Art. 166 para. 10 CRR conversion factors for medium risk (50%) and medium / low risk 20%.

Exposure value

The risk position value is the book value remaining after specific credit risk adjustments , value adjustments and other reductions in equity capital linked to an asset position (Art. 111 No. 1 CRR). Depending on the level of risk, the standard approach uses 100% (high risk), 50% (medium risk), 20% (medium / low risk) and 0% (low risk) as the risk position value. The risk exposure values ​​for the exposure classes listed in Art. 112 CRR are then multiplied by the calculated risk weight (Art. 113 No. 2 CRR), from which the credit collateral that can be recognized is subtracted. With the standard approach according to Art. 114 CRR , the risk weight depends on the rating of a recognized rating agency , to which risk weights between 0% (credit rating 1 for EU member states) and 150% (credit rating 6 for companies ) are assigned. Risk weight is the percentage to which a risk position is to be included in the own funds.

Risk position values ​​in the standardized approach according to Art 112 et seq.CRR:

Credit rating 1 2 3 4th 5 6th
Central governments and central banks 0 20th 50 100 100 150
Credit institutions 20th 50 100 100 100 150
Companies 20th 50 100 100 150 150
Bulk business 75 75 75 75 75 75
Real estate collateral 35/50 35/50 35/50 35/50 35/50 35/50

Remarks:

Individual evidence

  1. ↑ Regulation (EU) No. 575/2013 of June 26, 2013, No. 90 of the preliminary remarks , L 176/12
  2. ^ Olaf Fischer: General banking management . 2014, p. 21
  3. ^ Olaf Fischer: General banking management . 2014, p. 23