BASEL FRAMEWORK Special issues in Indian banking sector. BASEL 1 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
1
BASEL FRAMEWORK
Special issues in Indian banking sector.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
2
Bank for International Settlements
TypeInternational organization
Purpose/focusCentral bank cooperation
Location Basel, Switzerland
Membership 58 central banks
General manager Jaime Caruana
Main organ Board of directors
Website www.bis.org
Microsoft Office Word Document
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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BIS - BANK FOR INTERNATIONAL SETTLEMENTS
Established on 17 May 1930. Two representative offices: 1. Hong Kong2. Mexico City
BIS fosters co-operation among central banks and other agencies in pursuit of monetary and financial stability.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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Every two months, the BIS hosts in Basel, meetings of Governors and senior officials of member central banks.
Representatives from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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It publishes statistics on global banking, securities, foreign exchange and derivatives markets.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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BASEL ACCORDS
The Basel Accord of 1988 (Basel I) focused almost entirely on credit risk.
Capital and a structure of risk weights for banks.
The G-10 countries agreed to apply the common minimum capital standards to their banking industries by end of 1992.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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In June 2004, a revised international capital framework was introduced through Basel II.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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BASEL II
Framework is based on three pillars.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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1. Minimum Capital Requirements2. Supervisory Review Process3. Market Discipline
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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THE FIRST PILLAR – MINIMUM CAPITAL REQUIREMENTS
Tier 1 Capital includes only permanent shareholders’ equity and disclosed reserves .
Share premium Retained earnings General reserves Legal reserves
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
11
Tier 2 Capital includes – undisclosed reserves, revaluation
reserves, general provisions and loan-loss reserves, hybrid (debt / equity) capital instruments and subordinated term debt.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
12
Tier 3 Capital is represented by short-term subordinated debt covering market risk.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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THE SECOND PILLAR – SUPERVISORY REVIEW PROCESS
Principle 1 Banks should have a process for
assessing their overall capital adequacy in relation to their risk profile and a strategy for maintaining their capital levels.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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Principle 2 Supervisors should review and evaluate
the bank’s internal capital adequacy assessments and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios.
Appropriate corrective action is to be taken, if required.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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Principle 3 Supervisors should expect banks to
operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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Principle 4 Supervisors should seek to intervene at
an early stage to prevent capital from falling below the minimum levels required to support the risk characteristics of a particular bank and should require rapid remedial action if capital is not maintained or restored.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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THE THIRD PILLAR – MARKET DISCIPLINE
This is meant to complement the other two pillars.
The bank’s disclosures need to be consistent with how senior management and the Board of Directors assess and manage the risks of the bank.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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On 12 September 2010 meeting, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening of existing capital requirements.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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BASEL III
Set of reform measures to strengthen the regulation, supervision and risk management of the banking sector.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
Improve risk management and governance
Strengthen banks' transparency and disclosures.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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THE REFORMS TARGET:
Bank-level, or micro-prudential regulation, which will help raise the resilience of individual banking institutions to periods of stress.
Macro-prudential, system wide risks that can build up across the banking sector as well as the pro-cyclical amplification of these risks over time.
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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HELP YOURSELF
http://www.rbi.org.in/scripts/governors.aspx#manmohan
http://www.bis.org/
Microsoft Office Word Document
BASEL
YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
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BASEL
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