Typically, economic capital is calculated by determining the amount of capital that the firm needs to ensure that its realistic balance sheet stays solvent over a certain time period with a pre-specified probability. Therefore, economic capital is often calculated as value at risk.
The concept of economic capital differs from regulatory capital in the sense that regulatory capital is the mandatory capital the regulators require to be maintained while economic capital is the best estimate of required capital that financial institutions use internally to manage their own risk and to allocate the cost of maintaining regulatory capital among different units within the organization.
Occ: Market Risk Capital Rule: Clarification of the Treatment of Certain Sovereign and Securitization Positions
May 10, 2013; WASHINGTON -- The following information was released by the Comptroller of the Currency: OCC 2013-13 Subject: Market Risk Capital...
Market Risk Capital Rules: Creditworthiness Standards To Replace Credit Ratings.(United States. Office of the Comptroller of the Currency)(Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010)
Jan 25, 2012; On December 21, 2011 the Office of the Comptroller of the Currency ("OCC Board of Governors of the Federal Reserve System ("Board...