Term Paper OnB-406:Central Banking & Regulations Submitted To: Mr. Shahidul Islam Zahid Lecturer Department of Banking University of Dhaka Submitted By Group-12 Date of Submission 17th Nov, 2011
Date: 17th November, 2011.ToThe course teacherMr. Shahidul Islam ZahidLecturerDepartment of BankingUniversity of DhakaSubject: An application for acceptance of term paper.Dear Sir,It is our pleasure to submit to you the term paper on ‘Implementation of BASEL- that you haveassigned us to prepare. We have tried my best in preparing this term paper and hope it willsatisfy your desire and my course requirement.We will be always available if any clarification is needed. We request you to excuse us for anymistake that may occur in the term paper despite our best effort. We believe you will view mymistakes with your generous consideration.Yours sincerely Name ID No: Signature Nadia Rahman 16 Md. Nazmul Alam 02 17 Md .khairuzzman 50 Md. Farhadur Rahaman Imtiaz Ahmed Nayeem 09 Sohana Ferdaus 18
Acknowledgement Preparing the term paper on BASEL III implementation in banking sector has been a greatexperience for us in light of the course 406:Central Banking: Regulations and Supervision Westrongly believe works like this will surely help us to have a clear concept about Basel Accordand Basel III. We express our sincere gratitude to our honorable course teacher Md. ShahidulIslam, Lecturer, Department of Banking, University of Dhaka for his guidance, advice andgiving outline for preparing this report.Besides, we thank our group members for their hard working, encouragement andcollaboration in the success worthy completion of this report.
E x ecu tiv e S u mmaryBASEL III is a new global regulatory standard on bank capital adequacy and liquidity agreed bythe members of the Basel Committee on Banking Supervision. The third of the Basel Accordswas developed in a response to the deficiencies in financial regulation revealed by the globalfinancial crisis. Basel III strengthens bank capital requirements and introduces new regulatoryrequirements on bank liquidity and bank leverage.Basel III is an evolution rather than a revolution for many banks. It was developed from theexisting Basel II framework, and the most significant differences for banks are the introductionof liquidity and leverage ratios, and enhanced minimum capital requirements. An effectiveimplementation of Basel III will demonstrate to regulators, customers, and shareholders that thebank is recovering well from the global banking crisis of 2008. A speedy implementation willalso contribute to a bank’s competitiveness by delivering better management insight into thebusiness, allowing it to take advantage of future opportunities. Although implementing Basel IIIwill only be an evolutionary step for many organizations, the impact of Basel III on banks andthe banking sector should not be underestimated, because it will drive significant challenges thatneed to be understood and addressed. For every bank, working out the most cost-effective modelfor implementing Basel III will be a critical issue.Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% ofTier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introducesadditional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) adiscretionary countercyclical buffer, which allows national regulators to require up to another2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum3% leverage ratio and two required liquidity ratios. The Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets tocover its total net cash flows over 30 days; the Net Stable Funding Ratio requires the availableamount of stable funding to exceed the required amount of stable funding over a one-year periodof extended stress.
Table of contentsserial particulars Page 1.0 1-2 Introduction 1 1.1 Methodology 2 1.2 objective of the report 3 1.3 Limitations 2.0 Overview 3.0 BASEL III at a glance 3-6 4.0 Implementation of BASEL III 6 5.0 Features of Basel III 6-8 6.0 Detail analysis of Basel III 8-9 7.0 Transition arrangements 9-11 8.0 Impact of Macroeconomic in Basel III 12 9.0 Challenges that facing to implement the Basel 12-15 III10.0 10. Enforcement of Basel III on 15-17 financial institutions11.0 Conclusion 17