What happens if banks invest in funds?

This is an interesting post by Marco Folpmers: What happens if banks invest in funds?

Folpmers

An interesting new Basel Committee paper (Capital requirements for banks’ equity investments in funds, December 2013) presents the framework for calculating the capital requirement for banks’ equity investments in funds. The framework intends to achieve a more risk-sensitive capital treatment for banks’ equity stakes in funds.

This risk-sensitivity is implemented by making the capital requirement dependent on the risk of the fund’s assets and its leverage.

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