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    Bulletin Finanza: Basel Iii Norms

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    Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was developed in response to the financial crisis of 2008 to promote a more resilient banking sector. Key enhancements in Basel III include increasing and improving the quality of capital requirements, introducing new liquidity standards like the Liquidity Coverage Ratio and Net Stable Funding Ratio, modifying provisioning norms, and introducing a leverage ratio requirement. Implementing Basel III poses issues for Indian banks like the need for additional capital, potential barriers to growth, stronger risk management needs, and greater control of systemic risk.

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    Bulletin Finanza: Basel Iii Norms

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    Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was developed in response to the financial crisis of 2008 to promote a more resilient banking sector. Key enhancements in Basel III include increasing and improving the quality of capital requirements, introducing new liquidity standards like the Liquidity Coverage Ratio and Net Stable Funding Ratio, modifying provisioning norms, and introducing a leverage ratio requirement. Implementing Basel III poses issues for Indian banks like the need for additional capital, potential barriers to growth, stronger risk management needs, and greater control of systemic risk.

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    Article 9-Basel III

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    Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was developed in response to the financial crisis of 2008 to promote a more resilient banking sector. Key enhancements in Basel III include increasing and improving the quality of capital requirements, introducing new liquidity standards like the Liquidity Coverage Ratio and Net Stable Funding Ratio, modifying provisioning norms, and introducing a leverage ratio requirement. Implementing Basel III poses issues for Indian banks like the need for additional capital, potential barriers to growth, stronger risk management needs, and greater control of systemic risk.

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    Bulletin Finanza: Basel Iii Norms

    Uploaded by

    karan_w3
    Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was developed in response to the financial crisis of 2008 to promote a more resilient banking sector. Key enhancements in Basel III include increasing and improving the quality of capital requirements, introducing new liquidity standards like the Liquidity Coverage Ratio and Net Stable Funding Ratio, modifying provisioning norms, and introducing a leverage ratio requirement. Implementing Basel III poses issues for Indian banks like the need for additional capital, potential barriers to growth, stronger risk management needs, and greater control of systemic risk.

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    BULLETIN FINANZA

    Finalyze Club, IMI, New Delhi


    ISSUE 9

    10.10.2014

    BASEL III Norms


    What is BASEL III Norms?
    Basel III (or the Third Basel Accord) is a global, voluntary regulatory standard on
    bank capital adequacy, stress testing and market liquidity risk. Basel III was developed in
    response to the deficiencies in financial regulation revealed by the financial crisis that
    happened in 2008. It was scheduled to be introduced from 2013 until 2015; but the
    deadline was extended until 31st March 2018 and again it has been extended to 31st
    March 2019.

    Why BASEL III Norms?


    According to the BCBS, the Basel III proposals have two main objectives:

    To strengthen global capital and liquidity regulations with the goal of promoting a
    more resilient banking sector.

    To improve the banking sector's ability to absorb shocks arising from financial and
    economic stress.

    Enhancements of Basel III over Basel II


    (i) Augmentation in the level and quality of capital - While the 8% minimum
    capital requirement remains unchanged under Basel III, there is an added 2.5% as capital
    cushion buffer.

    (ii) Introduction of liquidity standards - The Basel Committee has further


    strengthened the liquidity framework by developing two minimum standards for
    quantifying funding liquidity; Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio
    (NSRF).

    (iii) Modifications in provisioning norms - Basel III is talking about a move from
    incurred loss approach to expected loss approach.

    (iv) Introduction of leverage ratio - The leverage ratio requirement would hence
    Finalyze Club, IMI, New Delhi

    set an all-encompassing floor to minimum capital requirements which would limit


    the potential erosive effects of gaming and model risk on capital against true risks.
    A 3% minimum Tier I leverage is recommended by Basel III. In India, banks are
    required to meet this norm from January 1, 2018.

    Basel III issues for Indian banks

    Additional capital

    Growth Barrier

    Risk management

    Systemic risk

    Impact of BASEL III on Individual banks and Financial


    System

    References
    BIS, Economic Times, Livemint

    Finalyze Club, IMI, New Delhi

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