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Measurement, Data & Capital

Report - December 2020

Following on from our previous work on economic capital methodology in 2017 and regulatory capital methodology in 2016, the aim of this project was to refresh our study of the range of practice for capital modelling within the banking industry. 

With the implementation of the SMA delayed until 2023, questions around banking capital modelling practice remain particularly relevant.

The study focused on general aspects of capital modelling methodology, along with a handful of topics specific to either economic or regulatory capital modelling.

Our aim was to understand the current range of practice, particularly with regards to the following topics.

  • Use of loss data
  • Model maintenance and design philosophy
  • Units of Measure
  • Frequency modelling
  • Severity modelling
  • Dependency: correlation/diversification
  • Scenarios
  • Economic capital

The report is available for all ORX members to read.

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Nikki Truss-West

Nikki Truss-West

Research Senior Manager - Cyber, ORX


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