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CAPITAL ALLOCATION AGAINST MARKET RISK
What is the primary purpose of capital allocation against market risk under the Basel framework?
Capital allocation against market risk ensures banks hold sufficient capital to absorb potential losses arising from adverse movements in market prices such as interest rates, equity prices, foreign exchange rates, and commodity prices.
What is the minimum capital requirement for market risk under Basel III as a percentage of risk-weighted assets?
8% total capital ratio covering credit, market and operational risk
Which Basel Committee document introduced the Fundamental Review of the Trading Book (FRTB)?
The FRTB was introduced through the Basel Committee's January 2016 standards document, substantially revising the market risk capital framework originally set out under Basel II and III.
What does the term 'market risk' refer to in the context of bank capital regulation?
Risk of losses from adverse movements in market prices
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