PricewaterhouseCoopers examines the concept, the benefits and the implementation of economic capital as it applies to financial services institutions.
Economic capital allows financial institutions to take into account the cost of risk when planning their future strategies, by making it clearer which ventures create the most value.
Companies can use the data to reassess their investment strategies and make better operational decisions. However, the implementation of an economic capital system is far from easy, requiring data on credit, market and operational risk.
This report, written in association with the Economist Intelligence Unit, suggests ten rules for establishing economic capital systems.
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