Basel 3 Morns

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BASEL III NORMS
B Y: RANJIT RAMKUMAR RASHMI.S

RENUKA PRASANNA

MEANING OF "BASEL III":

A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements.

REASONS FOR FORMULATION OF BASEL III
Reducing profitability of small banks and threat of takeover Lack of comprehensive approach to address risks Self-regulation in area of asset securitization Lack of safety Inability to strengthen the stability of financial system

Failure to achieve large capital reductions
Failure in enhancing the competitive equality amongst banks

AIMS & OBJECTIVES OF BASEL III
To minimize the probability of recurrence of crises to greater extent. To improve the banking sector's ability to absorb shocks arising from financial and economic stress. To improve risk management and governance.

To strengthen banks' transparency and disclosures .
To minimize the probability of recurrence of crises to greater extent.

STRUCTURE OF BASEL III

PILLAR 1- MINIMUM CAPITAL REQUIREMENTS
Calculate required capital Required capital based on    Market risk Credit risk Operational risk

Used to monitor funding concentration

PILLAR 2- SUPERVISORY REVIEW PROCESS
Bank should have strong internal process Adequacy of capital based on risk evaluation

PILLAR 3 – ENHANCED DISCLOSURE
Provide market discipline Intends to provide information about banks exposure to risk

SIGNIFICANT METHODS OF MEASUREMENT
The pillar is divided in three types of risk for which capital should be held: Credit Risk Operational risk…...

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