Accounting, regulatory capital and frictional risk CPD resources for enterprise risk management
Often the economic impact of risks will differ from the accounting and regulatory capital impact. Frictional risk covers these differences, and the impact changes in these have on capital requirements, dividend policy and the perception of the business in general. It also covers inefficiencies in operating structure (e.g. capital tied up in subsidiary entities) and the problems caused by intra-group exposures. Finally it also covers distortions caused by changes in tax regulations.
Regulatory capital - general
- FSA capital requirements. Details can be found in General Prudential Sourcebook (GENPRU).
- Prudential sourcebook for Insurers (INSPRU). Supplement to the General Prudential Sourcebook.
- Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU). Supplement to the General Prudential Sourcebook.
Regulatory capital - Solvency II
- CEIOPS. Solvency II will radically change insurer capital requirements. This is driven by the pan-European regulatory body CEIOPS.
- FSA Solvency II site.
- FSA schedule of existing publications [pdf]. Summary of past publications relating to Solvency II.
- PwC Solvency II site
- Towers Watson Solvency II site
- Deloitte Solvency II site
Regulatory capital - Basel II
- Bank of International Settlements. Bank capital requirement standards are set by the Bank of International Settlements (BIS).
- Basel II: Revised international capital framework. The BIS standard for banks and asset managers.
- Basel II: International convergence of capital measurement and capital standards:. Comprehensive version of the BIS standards.
- An explanatory note on the Basel II IRB risk weight functions. BIS, 2005.
Accounting standards
- International Accounting Standard Board.
- UK Financial Reporting Council and Accounting Standard Board.
- CFO Forum of leading European insurers. This Forum is driving embedded value reporting.
- Market Consistent Embedded Value (MCEV) - principles [pdf]. CFO Forum, 2009.
- Market Consistent Embedded Value (MCEV) - basis for conclusions [pdf]. CFO Forum, 2009.
- Fair value accounting and financial stability [pdf]. Paper by a staff team led by Andrea Enria. European Central Bank Occasional paper series no. 13 (2004)
Other areas of frictional risk
These areas are being developed. If you have any interesting papers or sites which you feel should be included here, please let us know.
- Intra-group exposures
- Tax regulations
If you have any interesting papers or sites on frictional risk which you feel should be included here, please send them to Dawn McIntosh, the manager for the ERM practice executive committee (dawn.mcintosh@actuaries.org.uk).