BASEL III

BY:
ANJU CHAKRAPANI 0920837
KANCHAN KAYA 0920842
PRIYANKA FRANCEL NAZARETH 0920846
II YEAR MBA – G (FINANCE)
 INTRODUCTION

Bank for International Settlements (BIS) is an

international organization of central banks which aims to
make banking and monetary policy more predictable and
transparent. It acts as a supervisory body that closely
scrutinizes the financial policies prevalent worldwide.

Basel Committee on Banking Supervision was set

up in 1974 under the supervision of BIS.

Basel I was published in 1988 as a set of minimal capital

requirements for banks. This is also known as the 1988
Basel Accord, and was enforced by law in the Group of
Ten (G-10) countries in 1992.
 BASEL II
Basel Committee on
Banking Supervision

 Basel II is the second of the Basel Accords issued by

the Basel Committee on Banking Supervision.
 The official name of this framework is ‘International
Convergence of Capital Measurement and Capital
Standards: a Revised Framework’.
 The purpose of Basel II is to create an international
standard that can be used while creating regulations
about how much capital banks need to put aside to
safeguard against the different types of financial and
operational risks.
 3 FUNDAMENTAL PILLARS OF

 Pillar 1 deals with the calculation of the minimum capital

requirements. This regulatory capital has to be maintained against
Credit, Operational and Market risk.

 Pillar 2 covers the Supervisory Review Process. It describes the

principles for effective supervision.

 Pillar 3 describes the need for market discipline. Banks have the
responsibility to disclose its policies and ensure transparency.
 BASEL III

The new Basel framework is referred to as Basel III.

It is a response to the comments and statements of

the G20 summit.

It was developed after making assessments

regarding loopholes or weaknesses that may have
contributed to the financial crisis.
 FOUR COMPONENTS OF BASEL III
1. Quality, consistency and transparency of the capital base
• Greater emphasis placed on the common equity component of Tier 1 capital
• Simplification of Tier 2
• Elimination of Tier 3
• Detailed regulatory capital disclosure requirements

2. Enhancement of risk coverage through enhanced capital requirements for

counterparty credit risk
• Enhanced risk coverage will address issues that arise in connection with the use of
derivatives, repos, and securities financing arrangements

3. Changes to non-risk adjusted leverage ratio

• This ratio will supplement the Basel II risk capital framework

4. Measures to improve countercyclical capital framework

THANK YOU