Basel III - Pillar II Risk Evaluation

Contrary to Basel’s first pillar which is fairly standardized and prescribes almost all methodologies to be used for capital adequacy purposes, the second pillar is much more open thus allowing a financial institution to adjust the first pillar’s measures according to its actual risks, within its own operating environment.

Main Features

As a result of its relatively open character, many banks underestimate the importance of Pillar 2 which in our view is extremely important particularly for smaller banks operating in less sophisticated markets as it is only through this Pillar that a Bank may demonstrate the thoroughness of its risk management process and the control of actual risks.

In this context, SYSTEMIC undertakes:

  • Actual Credit risk assessment
  • Concentration risk
  • Interest rate risk in the Banking book. 
  • Liquidity risk
  • Risk Correlation
  • Stress testing

To this effect, thorough workshops are held with senior management and active discussions are held on all our findings.