How Basel 3 Affect Banks

Topics: Asset, Finance, Management Pages: 1 (293 words) Published: July 24, 2013
How those changes affect bank
Minimum global standard for funding liquidity

Liquidity risk is the risk arising from failure to pay debts and contingent liabilities by the due date because of an inability to convert assets into cash. The liquidity coverage ratio(LCR) and Net stable funding ratio(NSFR) proposed in Basel3 which is in oder to reduce the liquidity risk of bank , and also monitoring the bank to manage liquidity risk from mismaching of cashflow. As the basel 3 proposed, the Bank of Ayudhya maintains liquid assets in accordance with regulatory requirements. The liquidity risk management policy has been implemented by bank for the sake of controlling and managing cash flow to ensure it is sufficient to cover activities under stressed conditions, meanwhile, the Contingency plans are formulated to deal with stress situations and to set up a liquidity cushion at a appropriate level. For the current condition, the structure and behavior of customers deposits and withdrawals activities are considered to be optimize balance, in addition, the Bank has prepared and adjusted their strategies to meet the implemention under the Deposit Protection Agency Act through both an introduction of additional liquidity management tools. (http://www.krungsri.com/en/investor-relation.aspx) As we mentioned in part 2, the increasing reserve, total equity and debt in 2011 has generated more stable funds and liquidity asset to bank, which can protected the Bank of Ayudhya from liquidity risk. If the LCR and NSFR implied by Bank of Ayudhaya, the liquidity management will be improved to avoid the crisis from liquidity in short-term, meanwhile, it incents structural changes in the liquidity risk profiles of bank away from short-term funding mismatches and toward more stable, longer-term funding of assets and business activities.
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