commercial bank
COMMERCIAL BANKING ASSIGNMENT.
ANALYSIS ON BASEL 3 NORMS.
Submitted by,
RAJ KIRAN.
PGDMF12025.
Introduction:
Basel 3 norms were implemented by Basel committee on Banking Supervision (BCBS) with the objective to improve the banking sector’s ability to absorb shocks arising from financial and economic stress.
Some of the major causes of the global financial crisis were: too much leverage, too little capital, and inadequate liquidity buffers. Other factors also responsible for this crisis were: shortcomings in risk management, corporate governance, market transparency and quality of supervision. These have pinpointed the systemic loopholes in the Basel II framework, which was considered a more risk-sensitive approach compared to its earlier version, Basel I.
Thus, Basel III was designed to address the weaknesses of the past crisis and to make the banking sector much stronger and efficient enough to face any crisis. The major thrust area of Basel III is improvement of quantity and quality of capital of banks, with stronger supervision, risk management and disclosure standards. These measures aim to
1. Improve the banking sector’s ability to absorb shocks arising from financial and economic stress.
2. Improve risk management and governance.
3. Strengthen bank’s transparency and disclosures.
Objectives of Basel 3:
Comprehensive set of reform measures to strengthen the banking sector.
Strengthens bank’s transparency and disclosures.
Special emphasis on capital adequacy ratio.
Features of Basel 3 norms:
Better capital quality.
Backstop leverage ratio.
Short term and long term liquidity funding.
Counter cyclical buffer.
Capital conversion buffer.
Pillars:
1. Minimum regulatory capital requirement based on Risk Weighted Assets.
2. Supervisory review process.
3. Market discipline.
Challenges of Basel 3:
1. Functional:
Functional specifications of new regulatory requirements.Functional integration of new
ANALYSIS ON BASEL 3 NORMS.
Submitted by,
RAJ KIRAN.
PGDMF12025.
Introduction:
Basel 3 norms were implemented by Basel committee on Banking Supervision (BCBS) with the objective to improve the banking sector’s ability to absorb shocks arising from financial and economic stress.
Some of the major causes of the global financial crisis were: too much leverage, too little capital, and inadequate liquidity buffers. Other factors also responsible for this crisis were: shortcomings in risk management, corporate governance, market transparency and quality of supervision. These have pinpointed the systemic loopholes in the Basel II framework, which was considered a more risk-sensitive approach compared to its earlier version, Basel I.
Thus, Basel III was designed to address the weaknesses of the past crisis and to make the banking sector much stronger and efficient enough to face any crisis. The major thrust area of Basel III is improvement of quantity and quality of capital of banks, with stronger supervision, risk management and disclosure standards. These measures aim to
1. Improve the banking sector’s ability to absorb shocks arising from financial and economic stress.
2. Improve risk management and governance.
3. Strengthen bank’s transparency and disclosures.
Objectives of Basel 3:
Comprehensive set of reform measures to strengthen the banking sector.
Strengthens bank’s transparency and disclosures.
Special emphasis on capital adequacy ratio.
Features of Basel 3 norms:
Better capital quality.
Backstop leverage ratio.
Short term and long term liquidity funding.
Counter cyclical buffer.
Capital conversion buffer.
Pillars:
1. Minimum regulatory capital requirement based on Risk Weighted Assets.
2. Supervisory review process.
3. Market discipline.
Challenges of Basel 3:
1. Functional:
Functional specifications of new regulatory requirements.Functional integration of new