Basel III versus Solvency II

This presentation (based on an IMF working paper) explores similarities and differences between banks and insurers and between Basel III and Solvency II. It then highlights possible unintended consequences of Basel III and Solvency II on topics such as cost of capital, funding patterns, interconnectedness and product and/or risk migration.

[as pdf]

1Basel III versus Solvency II
4Typical bank and insurer business models differ
5They also have different funding bases (excluding equity) …
6Different capital levels …
7Different accounting bases …
8And different perspectives on Pillar 1 versus Pillar 2
9Although some business overlaps (and conglomerates!)
11Basel III and Solvency II: Different histories and drivers
12Basel III and Solvency II Capital Tiering (Pillar 1) (1)
13Basel III and Solvency II Capital Tiering (Pillar 1) (2)
14Basel III and Solvency II Capital Requirements
15Basel III capital requirements
16Solvency II SCR: Standard Formula
17Basel III capital requirements (1)
18Basel III capital requirements (2)
19Banking backdrop in Europe 2011 to 2013
20Calculation of required Pillar 1 capital (banks)
22Calculation of required Pillar 1 capital (insurers)
24Consequence of decision to have some G-SIIs
25Risk Aggregation (Pillar 1)
27Possible unintended consequences
28Cost of capital
29Funding patterns and interconnectedness (1)
30Funding patterns and interconnectedness (2)
31Banks’ debt funding sources by type of investor
32Funding patterns and interconnectedness (3)
33Risk / Product transfers (1)
34Risk / Product transfers (2)
35Policy considerations
37Important Information

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