Current Trends and Future Progress in the Banking Risk and Capital Management

Abstract

During last three decades banking risk and capital management is intensively, constantly changing and developing. The major reasons are following. Starting from 80s of the last century, world economy and banking business had significant development and changing. Basel Committee on Banking Supervision (BCBS), central banks, regulators and business banks were searching for the adequate solutions for the risk and capital management. Regulation related to capital adequacy, measuring, methods and management had one of the central places in the attention of the mentioned institutions. These methods had achieved significant improvement and they are today very comprehensive and sophisticated. On the other hand, during the previous years, mentioned institutions were constantly coming to conclusions, that something in the risk and capital management, measuring, methods, should be improved, so that it would be adequate and efficient. During last period we saw the needs for the new Basel III improvement (in some institutions called Basel IV). Since Basel III improvement publications are available, we can perform further analysis. We have also seen the other recommendations for the improvements related to the risk and capital management. In this paper, we will perform comprehensive analysis of the risk and capital management progress, achieved in the previous period. Additionally, we will try to define recommendations for the improvement of the banking risk and capital management. For this purpose we will perform analysis of the actual risk and capital management and all major factors which are dominantly influencing and shaping risk and capital management in the banks.