Abstract The Pre-Commitment Approach (PCA) to capital requirements was developed and promoted by the US Federal Reserve in the 1990s. The proposal was conceived as an alternative to the market-risk capital requirements based on internal models then under discussion, and eventually adopted, by the Basel Committee. Notwithstanding the Fed continued to support the PCA, the idea was abandoned, probably because it was considered too optimistic to allow banks determine the level of capital. In this paper, we study the possibility to adapt the PCA as to work as a complementary (and not alternative) tool applied to the banking book Prudential Regulation. In particular, we explore the application of this approach to a well-known issue in the context of the Stress tests: the top-down vs bottom-up debate. We focus on bottom-up stress tests and suggest creating a system of monetary penalties (charges) proportional to the difference between the expected and the realised losses of a portfolio. The charges would aim to induce model developers to reveal their best forecasts. We show that this approach can be seen as an adaptation of the pre-commitment approach (PCA) but also as an application of the penalty criterion proposed by the Italian mathematician de Finetti as the foundation of the subjectivist definition of probability. We explain how the PCA could be adapted to bottom-up stress testing and provide a practical example of the application of our proposal to the banking book. What emerges is that the PCA can indeed mitigate banks’ incentives to provide underestimated measures of risk under the adverse scenario and thus better align the incentives of banks and supervisors.

中文翻译：

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将承诺前方法应用于自下而上的压力测试：一个新的古老故事

摘要针对资本需求的承诺前方法（PCA）是由美国联邦储备委员会在1990年代开发和推广的。该提议被认为是基于当时正在讨论的内部模型的市场风险资本要求的替代方案，并最终被巴塞尔委员会采纳。尽管美联储继续支持PCA，但该提议被放弃了，可能是因为它被认为过于乐观，无法让银行确定资本水平。在本文中，我们研究了将PCA调整为适用于银行业审慎监管的补充（而非替代）工具的可能性。特别是，我们在压力测试的背景下探索了这种方法在一个众所周知的问题上的应用：自上而下与自下而上的辩论。我们专注于自下而上的压力测试，并建议创建与投资组合的预期损失和已实现损失之间的差额成比例的货币罚款（收费）系统。这些收费旨在诱使模型开发人员披露他们的最佳预测。我们表明，这种方法可以看作是预先承诺方法（PCA）的改编，而且可以作为意大利数学家de Finetti提出的惩罚标准的应用，以此作为概率的主观主义定义的基础。我们解释了PCA如何适用于自下而上的压力测试，并提供了将我们的建议应用于银行账簿的实际示例。