Basel

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Basel

  1. 1. 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.
  2. 2. Bank for International Settlements Type International organization Purpose/focus Central bank cooperation Location Basel, Switzerland Membership 58 central banks General manager Jaime Caruana Main organ Board of directors Website www.bis.org BASEL 2 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  3. 3. BIS - BANK FOR INTERNATIONAL SETTLEMENTS  Established on 17 May 1930.  Two representative offices: 1. Hong Kong 2. Mexico City  BIS fosters co-operation among central banks and other agencies in pursuit of monetary and financial stability. BASEL 3 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  4. 4.  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 4 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  5. 5.  It publishes statistics on global banking, securities, foreign exchange and derivatives markets. BASEL 5 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  6. 6. 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 6 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  7. 7.  In June 2004, a revised international capital framework was introduced through Basel II. BASEL 7 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  8. 8. BASEL II Framework is based on three pillars. BASEL 8 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  9. 9. 1. Minimum Capital Requirements 2. Supervisory Review Process 3. Market Discipline BASEL 9 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  10. 10. 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 10 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  11. 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 11 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  12. 12.  Tier 3 Capital is represented by short-term subordinated debt covering market risk. BASEL 12 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  13. 13. 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 13 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  14. 14. 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 14 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  15. 15. 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 15 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  16. 16. 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 16 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  17. 17. 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 17 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  18. 18.  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 18 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  19. 19. BASEL III  Set of reform measures to strengthen the regulation, supervision and risk management of the banking sector. BASEL 19 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  20. 20.  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 20 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  21. 21. 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 21 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  22. 22. HELP YOURSELF  http://www.rbi.org.in/scripts/governors.aspx# manmohan  http://www.bis.org/ BASEL 22 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.
  23. 23. BASEL 23 YOGESH NAMDEO INGLE. MBA (FINANCE), NET (MANAGEMENT), Ph.D (WIP), G.D.C &A, NCMP.

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