Keel is subject to liquidity and capital adequacy frameworks, enforced in real-time.
The Sky Allocation System is governed by the capital adequacy requirements, rules, and liquidity constraints set out in the Sky Atlas, and Keel’s operations are designed with these requirements in mind.
The Keel model is structured to support an over-collateralized balance sheet through Junior and Senior Risk Capital.
The level of risk capital required is a function of the underlying allocations, exposures and their associated financial, technical, operational and legal risks. Compliance with these rules is continuously monitored and enforced in real-time by automated systems established in the Keel Capital Engine.
The specific details of the Stability Scope can be found in Sky’s Atlas.
In traditional financial markets, it's not enough for institutions to match their liabilities with assets. Over time, systemic risks, volatility, and market shocks have shown that institutions also need to hold additional capital, above and beyond their obligations, to remain solvent during periods of stress.
This idea is called overcollateralisation:
Holding more assets than liabilities, so the institution can absorb potential losses while still meeting its commitments.
To enforce this, financial systems created risk-based capital frameworks — rules that determine how much extra capital an entity must hold, based on the riskiness of its positions.
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Extra capital for the Keel Protocol is referred to as Junior and Senior Risk Capital.
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These frameworks are overseen by regulators in traditional financial markets. In Keel’s case, both predetermined parameters governed by automated systems in the Keel Capital Engine and the Sky Protocol play this supervisory role.
Before allocations are made into any third party protocols, a ‘Technical Risk Review’ is performed by an independent team within Sky, including providing assessments of the relevant risks based on a multitude of factors. Allocations are predicated on an open source codebase, multiple audits, verified builds, and sufficient Lindy effect.
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