The world's largest and most profitable financial institutions have long used Economic Capital and risk-adjusted return on capital (RAROC) to manage their businesses. Economic Capital and RAROC can be used to link risk, capital and shareholder value in a framework that allows performance to be evaluated efficiently and effectively at all levels of a company.

Over the past few years, technological and theoretical advances have made Economic Capital and RAROC a realistic choice for a wider range of institutions, including smaller financial firms, insurers and non-financial corporations. To learn more about this framework, and what it can do for you, explore the resources below.

An Overview: Economic Capital & RAROC

• What is Economic Capital?
• What can Economic Capital & RAROC do for your business?
• Who’s using Economic Capital & RAROC?
• How to choose the right system for Economic Capital Analysis
• Why Economic Capital & RAROC from BancWare ERisk?

Select Resources from BancWare ERisk

• “Between RAROC and a Hard Place” An overview of financial institutions' trials and tribulations in using risk-adjusted return on capital, including comments from advanced European bank, SEB, and from insurer Swiss Re New Markets.
  
• “Taking the Risk out of Retail Credit Modeling” Urs Wolf, Credit Suisse Banking, 2001. This feature looks at why portfolio modelling and economic capital concepts have not been a feature of managing retail credit portfolios, and suggests some solutions involving macroeconomic factors.
  
• “Making Internal Ratings Work" Michel Crouhy and Bob Mark, CIBC, 2001. This feature discusses the extent to which the new Basle II internal ratings based framework resembles an economic capital approach and looks at some practicalities for implementation.

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