Beginning next January, banks that meet certain qualitative and quantitative standards for risk management will calculate market risk capital charges for their trading activities on the basis of their own internal Value at Risk (VaR) measures.
Here again, supervisors recognized early developments in the quantitative measurement of market risks, encouraged industry progress, and sought to build on the VaR concept when developing a supervisory approach. During the discovery and rulemaking process the supervisory attention paid to VaR techniques led to more robust modelling and has helped spread the use of VaR techniques worldwide.