The principle I (also: Own resources is a development of the supervision right for banks by the BaFin and an important component of the own resources requirements to credit institutes. Principle I specifies "§"§ 10, 10a of the credit system law, by defining a risk delimitation standard. Principle 1 states comprehensively, by which criteria as a rule the suitability of the own resources equipment is judged. Its goal is the delimitation of address loss risks, real value loss risks and price risks.

According to principle I own resources must be larger than the sum of all amounts of risk charge (the total risk position).

In accordance with the regulations the credit institutes their address loss risks and market risks must quantify principle 1 and with own resources support.

In "§ 1 exp. 12 KWG accounting book risk positions seized as financial instruments and on it referred security business. Thereby share quotation-referred risks concern address loss risks and interest and.

Risk weights

Two "“preference zones"” are differentiated. The States of those the OECD belong form the preference zone to A, which becomes remainder of the world preference zone B with the regulation all non-banks uniformly underlaid with 100%.

It takes place an organization into three groups of debtors:

• Public places
• Financial service listing and/or Kreditinstitut (Institut)
• Other one

In the case of public places and banks demands from preference zone A receive a lower risk weight (20%) than Foderungen from preference zone B.

With demands on centre governments the risk weight is to the preference zone A with 0%.

Central banks are better placed opposite business banks.

The own capital funds supporting results then as assessment basis * soil quality weight * 8 per cent.

Adjustment of credit risk

Principle I writes the own resources supporting of Ausfallsrisken from assets and business except-relating to the balance, which do not appear in the accounting book, forwards.

The height of the loss risk is only very overall seized. Principle I differentiates between states, credit institutes and enterprises regarding the charge sets for the own resources supporting. For example for the group of emitters the following run timedependent regulations apply for the preference zone A (stock exchange-acted securities of good soil quality):

• Running time below 6 months: Charge set 3.125% (*8%= 0.25%)
• Running time between 6 months and 2 years: Charge set 12.50% (*8%= 1%)
• Running time over 2 years: Charge set: 20.00% (*8%= 1.6%)

Adjustment of market risk

Among the market risks rank foreign currency risk, raw goods risk as well as the and share quotation risks of the accounting book. Those are all financial instruments including the security business and warranties with interest and share quotation-referred risks are afflicted. The regulations of the own resources equipment apply also to pure security companies. The accounting book risk positions separately seizes, so that to homogeneous business the same regulations apply.

Amount of charge designates the amount, which for market price risk positions and/or risks from option business must be actually reproached at own capital funds.

Determination of the amount of partial charge for the general risk of change of interest

• Balancing within run time volumes
• Balancing within Laufzeitzinen
• Balancing between the respective run time zones

Supporting the remaining open position with 100%

Forms of the credit provision of security

Necessary supporting with own resources can be reduced by credit provision of security. In addition belongs credit, which is secured with a mortgage lien. Demands can bspw. with endorsements or also by deposit of securities secured its. This leads to lower charge sets.

Emergence and relevance

In "§ 10 KWG and in the principle I the European minimum own capital funds standards given in the bank right guideline (2000/12/EG) and the (93/6/EWG) are converted into national right. Also the regulations of the Baseler own capital funds recommendation of 1988 (Basel I) to a large extent found entrance.

Principle I applies up-to-date and at least still to at the beginning of of 2007. Starting from 2007 Basel II becomes obligatory.

Articles in category "Principle 1"

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