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Solvency II reflects new risk management practices to define required capital and manage risk. While the "Solvency I" Directive was aimed at revising and updating the current EU Solvency regime, Solvency II has a much wider scope. A solvency capital requirement may have the following purposes:
The second pillar of Solvency II plans to complete the quantitative capital requirements with quality requirements and a global and appropriate risk management system. The reform provides measures on governance, internal control and internal audit in order to ensure sound and prudent management practices from insurers.
Basel II attempted to accomplish this by establishing risk and capital management requirements to ensure that a bank has adequate capital for the risk the bank exposes itself to through its lending, investment and trading activities. One focus was to maintain sufficient consistency of regulations so to limit competitive inequality amongst ...
The Solvency II Directive 2009 is directed particularly at insurance firms, requiring minimum capital and best practices in valuation of assets, again to avoid insolvency. [17] The Capital Requirements Directives contain analogous rules, with a similar goals, for banks.
Capital Requirements Regulation 2013; ... Minimum capital; O. ... Reserve requirement; Risk capital; Risk-adjusted return on capital; Risk-weighted asset; S. Solvency II;
A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets.
The Swiss Solvency Test (SST) is a risk based capital standard for insurance companies in Switzerland, in use since 2006. The SST was developed by the Swiss Federal Office of Private Insurance (FOPI) in cooperation with the Swiss insurance industry.
Directive 2010/76/EU was to be implemented in two phases. The first, which affects the remuneration provisions, as well as a number of other ones dealing with the extension of some pre-existing minimum capital requirements, had to be implemented by 1 January 2011. The remaining provisions had to be implemented by 31 December 2011.