Basel I, II and III: Did the Basel Regulations Work?

Pages: 21 (6743 words) Published: June 19, 2013
Basel I, II and III: Did Basel regulations work?

Major course assessment in Empirical Banking, Summer Term 2012, University of Constance; Lecturer: Prof. Moshe Kim

By: Kerstin King Daniel Boss Enrique R. Perezyera B.

Table of Contents
List of Abbreviations.......................................................................................................................... III List of Tables...................................................................................................................................... IV 1. 2. Introduction................................................................................................................................. 1 Rationale for Bank Regulation.................................................................................................. 1 2.1. Monetary and Financial Stability....................................................................................... 2 2.2. Efficient and Competitive Financial System ......................................................................2 2.3. Consumer and Depositor Protection.................................................................................. 3 Basel I........................................................................................................................................... 3 3.1. The Basel Committee on Banking Supervision ................................................................. 3 3.2. Capital Measures and Credit Risk (Weights)..................................................................... 4 3.3. Criticism............................................................................................................................. 7 Basel II......................................................................................................................................... 8 4.1. Pillar I: Minimum Capital Requirements ........................................................................... 8 4.2. Pillar II and III: Supervisory Review Process and Disclosure Requirements.................. 11 4.3. Criticism........................................................................................................................... 12 Basel III...................................................................................................................................... 13 Conclusion..................................................................................................................................15

3.

4.

5. 6.

References........................................................................................................................................... V

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List of Abbreviations
A-IRB BCBS BIS CET1 EAD F-IRB IRB LCR LGD LLR M NSFR PD QIS RWA SIFI VaR Advanced Internal Ratings Based Basel Committee on Banking Supervision Bank for International Settlements Common Equity Tier 1 Exposure at Default Foundation Internal Ratings Based Internal Ratings Based Liquidity Coverage Ratio Loss Given Default Lender of Last Resort Maturity, Million Net Stable Funding Ratio Probability of Default Quantitative Impact Study Risk Weighted Assets Systemically Important Financial Institutions Value at Risk

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List of Tables
Table 1: Table 2: Table 3: Risk-weight categories in Basel I........................................................................................ 5 Example to determine min. required capital concerning credits to different debtors .........6 Risk-weights for credit risk in Basel II (Standardized Approach). .....................................9

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1.

Introduction

The financial sector has been scrutinized in the news for the last few years. The propaganda they have received since 2007/08 has mostly been negative and the expectation of a major collapse is still being discussed in many ways. This leads to the question of how to avoid such circumstances and in what ways. Banking regulation is a discussed...

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Koch, Timothy W. and S. Scott MacDonald. 2010. Bank Management. South-Western Cengage Learning. KPMG. 2011. Basel III: Issues and implications. http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/basellIII-issues-implications.pdf (18.06.2012) Lall, Ranjit. 2009. Global Economic Governance Program: Why Basel II Failed and Why Any Basel III is Doomed. http://www.globaleconomicgovernance.org/wp-content/uploads/GEGWorking-paper-Ranjit-Lall.pdf (11.07.2012) MacNeil,Iain G and Justin O’Brien. 2010. The Future of Financial Regulation. Hart Publishing. Oxford and Portland, Oregon. Natter, Raymond. 2005. The Basel II Standardized Approach. http://apps.americanbar.org/buslaw/committees/CL130000pub/newsletter/200609/natter.pdf (11.07.2012) Oertel, Frank. 2011. Basel III: Capital Changes. http://frank-oertelmath.de/On_Basel_III_Feb_2011.pdf (27.06.2012) Oatley, Thomas, 2000. The Dilemmas of International Financial Regulation. In Regulation Vol. 23 No. 4, pp. 36-39. Saidenberg, Marc and Til Schuermann. 2003. The New Basel Capital Accord and Questions for Research. http://fic.wharton.upenn.edu/fic/papers/03/0314.pdf (11.07.2012) Spong, Kenneth. 2000. Banking Regulations: Its Purposes, Implementation and Effects. Fifth Edition. Division of Supervision and Risk Management Federal Reserve Bank of Kansas City. Tarullo, Daniel K. 2008. Banking on Basel: The Future of International Financial Regulation. Peterson Institute for International Economics. Washington, DC. Trichet, Jean-Claude. 2004. Announcement of Basel II. http://www.bis.org/review/r040628a.pdf (12.06.2012) Wallison, Peter J. 2005. “Why Do We Regulate Banks?” in Regulation: Winter 2005, Vol. 28 No. 4, pp. 14-19. Williams, Grant. 2011. Things that make you go hmm. http://www.scribd.com/fullscreen/73252521? access_key=key-1ponh2jnc09vkw1s072f (27.06.2012)
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