Case 1: Tick size pilot program
Case 3: Porche’s FX hedging case
Case 5: LinkedIn Valuation case
| Aspect | Basel I | Basel II |
|---|---|---|
| Risk Sensitivity | Low; broad risk weights | High; refined risk weights and internal models |
| Risk Types Covered | Credit risk (initially); market risk (1996 amendment) | Credit, market, and operational risks |
| Capital Calculation Approaches | Standardized approach only | Standardized and Internal Ratings-Based approaches |
| Three-Pillar Framework | Not present | Introduced Pillars 1, 2, and 3 |
| Operational Risk | Not included | Included under Pillar 1 |
| Supervisory Review | Limited focus | Emphasized under Pillar 2 |
| Market Discipline | Minimal requirements | Enhanced disclosure under Pillar 3 |
| Credit Risk Mitigation | Limited recognition | Expanded recognition and detailed guidelines |
| Risk Differentiation | Broad categories | Granular and risk-sensitive |
| International Adoption | Mainly G10 countries | Broader global adoption |
| Feature | (Common Equity) CET1 Capital | (Alternative tier 1) AT1 Capital | Tier 2 Capital |
|---|---|---|---|
| Loss Absorption | Going concern | Going concern | Gone concern |
| Components | Common shares, retained earnings | Perpetual subordinated instruments with loss absorption features | Subordinated debt, loan-loss reserves |
| Maturity | Perpetual | Perpetual (callable) | Minimum 5 years (amortized) |
| Distributions | Discretionary dividends | Discretionary, non-cumulative | Contractual interest payments |
| Subordination | Lowest in liquidation | Subordinate to Tier 2 | Subordinate to senior debt |
| Regulatory Requirement | Minimum 4.5% of RWA | Minimum 1.5% of RWA | Minimum 2% of RWA |
| Ranking in Liquidation | Last | Above CET1, below Tier 2 | Above AT1 and CET1 |