---
title: (Un)Calculated Risk | by Peter Orr of Intuitive Analytics | variable rate bonds | Intuitive Analytics
description: variable rate bonds | by Peter Orr of Intuitive Analytics
---

# (Un)Calculated Risk | by Peter Orr of Intuitive Analytics

## [New Headline: Muni Issuers Make Outstanding Speculators](https://www.intuitive-analytics.com/blog/new-headline-muni-issuers-make-outstanding-speculators)

 Posted by Peter Orr on Apr 18, 2015

[![](https://www.intuitive-analytics.com/hubfs/calculated_risk_pic.png) ](https://www.intuitive-analytics.com/blog/new-headline-muni-issuers-make-outstanding-speculators)

> The path is smooth that leadeth on to danger.
> 
> – William Shakespeare

[Read More](https://www.intuitive-analytics.com/blog/new-headline-muni-issuers-make-outstanding-speculators)

 Topics: [Financial Decisions](https://www.intuitive-analytics.com/blog/topic/financial-decisions), [decision support](https://www.intuitive-analytics.com/blog/topic/decision-support), [swaps](https://www.intuitive-analytics.com/blog/topic/swaps), [municipal swaps](https://www.intuitive-analytics.com/blog/topic/municipal-swaps), [variable rate bonds](https://www.intuitive-analytics.com/blog/topic/variable-rate-bonds)

## [Basel III and the Future of Bank Supported VRDBs in Public Finance](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance)

 Posted by Peter Orr on Nov 01, 2010

[![](https://www.intuitive-analytics.com/hs-fs/file-15744000-jpg/images/istock_guy_head_on_desk_small.jpg) ](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance)

Last Friday I attended the Municipal Analysts Group of New York ([MAGNY](http://www.magny.org/))'s lunch event on [Basel III](http://www.basel-iii-accord.com/) and the future of the muni variable rate market. First MAGNY event I've been to; it was solid. Chris Wolfe, a Fitch bank analyst, Barbara Samett an analyst from Vanguard, and Bill Collins an MD in public finance at the Bank of Nova Scotia were panelists. 

[Basel I](http://en.wikipedia.org/wiki/Basel_I) was originally designed to set minimum capital levels for banks and create a level playing field for lenders from different countries. Basel I was rather simple and treated a wide range of credit risks with a coarse set of requirements, leading to regulatory arbitrage. It created perverse incentives for banks to load up on more risk increasing expected returns on capital. [Basel II](http://en.wikipedia.org/wiki/Basel_II) provided more granularity to asset classes and went down a more quantitative path allowing banks to use an internal ratings based approach. Unfortunately, Basel II also led to absurd things like 99.9% one year confidence levels. If you think you can reliably capture events that happen once in a thousand years, I've got some watery real estate in the Southeast for you...

 In light of the recent financial crisis and the fact that the once in a thousand year events seem to be occurring every 8-10 years, [Basel III](http://en.wikipedia.org/wiki/Basel_III) (The Return of the Regulators) is upon us. What does this mean for banks and their letter and line of credit products?  Here were the highlights from the discussion:

- Basel III has "scenario based" tests that will generally lead to significantly higher capital charges for banks, decreasing expected [RAROC](http://en.wikipedia.org/wiki/Risk_adjusted_return_on_capital).

- Basel III includes the concept of a "Net Stable Funding Ratio" for which Chris said none of the banks were particularly well-positioned. This may not go fully into effect until 2018.   

[Read More](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance)

 Topics: [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [public finance](https://www.intuitive-analytics.com/blog/topic/public-finance), [variable rate bonds](https://www.intuitive-analytics.com/blog/topic/variable-rate-bonds)

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