Private and ConfidentialBasel III impact on Indian BanksFebruary 2011
Index        a.   Where we are?        b.   Basel III : Transitional Arrangements        c.   Basel III : Key Components  ...
Where we are?                                                                        2010   2011   2012   2013   2014   20...
Basel III : Transitional Arrangements123                                            4
Basel III : Key ComponentsCapital Ratios/targets   1   Capital definition                         2   Countercyclical buff...
Basel III : Key Components   Basel III is BOTH a firm-specific, risk based framework and a system-wide, systemic risk-   ...
Basel III : Impact on Indian Banks                         Public sector banks (PSBs) –                            Margin...
Basel III : Impact on Indian Banks                     Banks having a huge trading book and off balance sheet derivative ...
Basel III impact on Public Sector Banks                            4.5%    7%                 10.5%                       ...
Basel III impact on Private Banks                  4.5%     7%     10.5%                                9.62%      ING Vys...
Basel III impact on Foreign Banks                   4.5%          7%           10.5%                                 6.72%...
Want to know more,please e-mail us at info@aptivaa.com                                                                    ...
A global minimum liquidity standardLiquidity Coverage Ratio (LCR)   The ratio is intended to ensure that a bank maintains...
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Ppt basel iii indian impact

  1. 1. Private and ConfidentialBasel III impact on Indian BanksFebruary 2011
  2. 2. Index a. Where we are? b. Basel III : Transitional Arrangements c. Basel III : Key Components d. Basel III : Critical Components impact on Indian Banks e. Basel III impact on Public Sector Banks f. Basel III impact on Private Banks g. Basel III impact on Foreign Banks 2
  3. 3. Where we are? 2010 2011 2012 2013 2014 2015 2016Internal Models Approach for Market Risk•Final Guidelines for IMA issued in April 2010.•The earliest date of making application by banks to RBI is 1st April2010.Internal Rating Based Approach for Credit Risk (Foundationas well as Advanced)•The earliest date for making application by banks 1st April 2012•Guidelines note under processAdvanced Measurement Approach for Operational Risk•Draft Guidelines note on 6th January 2011.•The earliest date for making application by banks 1st April 2012Basel III: Regulatory Framework (contd. Next slide)•Guidelines issued in December 2010.•Common equity requirement at 4.5% by 1st January 2015•Tier 1 capital requirement at 6% by 1st January 2015. 3
  4. 4. Basel III : Transitional Arrangements123 4
  5. 5. Basel III : Key ComponentsCapital Ratios/targets 1 Capital definition 2 Countercyclical buffers 3 Minimum capital standards 4 Leverage ratio 5 Systemic riskRWA Requirements 6 Counterparty risk 7 Trading book and securitization (also known as Basel II.5)Liquidity Standards 8 Liquidity coverage ratio 9 Net stable funding ratio 5
  6. 6. Basel III : Key Components Basel III is BOTH a firm-specific, risk based framework and a system-wide, systemic risk- based framework 6
  7. 7. Basel III : Impact on Indian Banks Public sector banks (PSBs) –  Marginal reduction in Tier 1 Capital. - Use of preference share capital and perpetual debt instruments.  To support rapid loan-book expansion in the coming years, government supports may Definition of Capital be required to enhance core tier 1 capital, assuming that government continue to hold 51% stake. Currently, there are only seven PSBs in which government equity is more than 65%  Banks with Core Tier I less than 7% would be negatively impacted.Countercyclical  It will have a impact on profitability and Return on equity (ROE)buffers  Deductions should be from core capital may lead to reduction of amount in coreDeductions capital for Indian Banks 7
  8. 8. Basel III : Impact on Indian Banks  Banks having a huge trading book and off balance sheet derivative exposures will beRWA impacted due to increased risk coverage (capital) on account of counterparty creditRequirements risk.  The implementation of liquidity ratio (LCR/NSFR) is from 2015 can lead IndianLiquidity Ratio Banks to maintain additional liquidity 8
  9. 9. Basel III impact on Public Sector Banks 4.5% 7% 10.5% 6.40% Vijaya Bank 7.69% 12.50% Common Equity Tier 1 6.85% United Bank 8.16% 12.80% Tier-1 (Net of Deduction) % 7.06% Union Bank 7.91% 12.51% CRAR 4.90% UCO Bank 7.06% 13.21% 7.17% As per the March 2010 dataset Syndicate Bank 8.24% 12.70% 8.60% State Bank of India - Group 9.28% 13.49%  The Average Common Equity Tier Punjab & Sind Bank 7.14% 7.68% 13.10% 1 capital of Public Sector Banks is Punjab National bank 8.04% 9.11% 7.27% and average CRAR is 14.16% 8.63% 13.21%.Oriental Bank of Commerce 9.28% 12.54% 7.68% Indian Overseas Bank 8.67% 14.78%  The Maximum and minimum of the Indian Bank 10.50% 11.13% 12.71% core capital (common equity tier 1) IDBI Bank 4.37% 6.35% are 10.50% and 4.37%. 11.48% 7.33% Dena Bank 8.16% 12.77%  Core Capital - One Bank is below 8.19% Corporation Bank 9.25% 15.37% Basel III prescribed CET 4.71% Central Bank of India 6.83% 12.23% Canara Bank 7.99% 8.54%  Tier 1 - Three Banks are falling 13.43% 5.61% short of Basel III prescribed Tier I Bank of Maharashtra 6.41% 7.51% 12.78% capital (net of deductions).Bank of India (Consolidated) 8.57% 13.00% Bank of Baroda 8.43% 9.20% 14.36%  The CRAR of all the public sector Andhra Bank 7.81% 8.18% banks is above 10.5%. 13.93% 7.72% Allahabad Bank 8.12% 13.62% % 0 . 0 1 % 0 . 2 1 % 0 . 4 1 % 0 . 6 1 % 0 . 8 1 % 0 . 0 % 0 . 2 % 0 . 4 % 0 . 6 % 0 . 8 9
  10. 10. Basel III impact on Private Banks 4.5% 7% 10.5% 9.62% ING Vysya Bank 10.11% Common Equity Tier 1 14.91% Tier-1 (Net of Deduction) % 9.65% Indusind 9.65% CRAR 15.33% As per the March 2010 dataset 12.42% South Indian Bank 12.42%  The Average Common Equity Tier 15.39% 1 capital of Private Banks is 10.89% 12.67% and average CRAR is Axis Bank 11.18% 15.80% 14.91%. 12.79%Jammu & Kashmir Bank 12.79%  The Private Banks are well 15.89% cushioned above the Basel III 13.13% HDFC Bank 13.26% defined Core (Common Equity Tier 17.44% 1) capital 16.92% Federal Bank 16.92%  The Maximum and minimum of the 18.36% core capital (common equity tier 1) 12.12% ICICI Group 12.92% are 17.31% and 9.62%. 19.15% 17.31%  The CRAR of all the private banks Kotak Group 17.31% is above 10.5%. 19.28% 11.84% Yes Bank 12.85% % .0 0 1 % .0 2 1 % .0 4 1 % .0 6 1 % .0 8 1 % .0 0 2 .% 0 % .0 2 % .0 4 % .0 6 % .0 8 10
  11. 11. Basel III impact on Foreign Banks 4.5% 7% 10.5% 6.72% Common Equity Tier 1 RBS 7.94% Tier-1 (Net of Deduction) % 15.77% CRAR As per the March 2010 datasetStandard Chartered 8.94%  The Average Common Equity 8.94% Bank Tier 1 capital of Foreign Banks is 12.41% 13.78% and average CRAR is 16.39%. 16.50% Deutsche Bank 16.50%  The Foreign Banks are well 18.03% cushioned above the Basel III defined Core (Common Equity 16.62% Tier 1) capital Barclays Bank 16.62% 17.21%  The Maximum and minimum of the core capital (common equity 16.63% tier 1) are 17.29% and 6.72%. HSBC Bank 16.63% 17.86%  The CRAR of all the foreign banks is above 10.5%. 17.29% Citibank -Group 17.29%  However, these are as per the 17.07% March 2010 dataset and the implementation of definition of capital as per Basel III are not % 0 . 0 1 % 5 . 2 1 % 0 . 5 1 % 5 . 7 1 % . 0 2 % . 0 % 5 . 2 % 0 . 5 % 5 . 7 taken into consideration. 11
  12. 12. Want to know more,please e-mail us at info@aptivaa.com Dubai | London | Mumbai | New York | SingaporeThank YouThis document is confidential and is purely to discuss the scope of a proposed assignment between Aptivaa and the Client.The document has been prepared by Aptivaa based on its understanding of the Client prior to engagement which may differat the time of actual execution of the project. This document at no time shall be considered a binding agreement betweenAptivaa and Client to perform any task mentioned herein. The contents of this document are confidential and shall not bereproduced without the explicit consent of Aptivaa. Aptivaa shall not be held responsible or liable for consequences of anydecisions taken on the basis of this document without further specific advice on any subject
  13. 13. A global minimum liquidity standardLiquidity Coverage Ratio (LCR) The ratio is intended to ensure that a bank maintains adequate levels of unencumbered high quality assets to meet its liquidity needs. Measured as the ratio of the bank’s high quality liquid assets (numerator), divided by its net cash outflows over a 30-day period (denominator) The high quality assets included in the numerator include only Cash, central bank reserves that can be accessed during times of stress, marketable securities meeting certain criteria, and government or central bank debt The denominator will be calculated by taking into account certain “run-off factors” LCR will be introduced as an observation exercise in 2011, and will be imposed as a rule as from 2015. High-quality liquid assets LCR = Net Cash Outflow (30 days) 13

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