03 Oct Buffing-up
Do your capital buffers need buffing-up – and if so, by how much? In a market buffeted by extreme events and uncertainty, there’s no easy answer: set aside too much capital for a rainy day, and you’ll reduce your returns and fall behind the competition; set aside too little, and you might get washed away by the next downpour. Luckily, there are steps a firm can take to properly calculate its buffers, involving linking a bank’s critical key performance indicators (KPIs) with stressful scenarios. Of course, conditions are constantly evolving. Capital buffers ought to do the same. To learn more, check out Alla Gil’s latest GARP column, which you can read here.