Basel introduction

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Introduction about Basel

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Basel introduction

  1. 1. Schönen Guten Tag<br />
  2. 2. Presentation Topic:<br />Basic Understanding of Basel Agreements<br />Course: <br />Finandamentalsof Financial Management WS 09/10<br />CourseInstructer: <br /> Prof. Dr. Gruner<br />PresenationBy:<br />Mehar Muhammad Ashfaq<br />Date:<br /> November 24, 2009<br />Coburg University of Applied Sciences-Germany<br />
  3. 3. Basic Understanding of Basel Agreements <br />ThrustofPresentation<br /><ul><li>Historical Aspects
  4. 4. Basel I:
  5. 5. Overview
  6. 6. Short-Comings
  7. 7. Achievements
  8. 8. ´Basel II:
  9. 9. Overview
  10. 10. Objectivesof Basel II
  11. 11. DifferenceBetween Basel I & Basel II.
  12. 12. Summary</li></li></ul><li>Whatis Basel……….?<br />4<br />Mehar Muhammad Ashfaq<br />
  13. 13. Overview on Basel <br />Committee Founded in 1974<br />By Central Bank Governors of G10<br /> (Belgium, Canada, France, Germany, Italy, Japan, Luxemburg, Netherlands, Spain, Sweden, Switzerland, UK, US)<br />Focus: Banking Supervision<br />Objectives:<br />Adequate Supervision<br />No Internationally Active Bank Should EscapeSupervision<br />Meets 4 Times a Year<br />Around 30 Working Groups / Task Forces<br />Location of Secretariat: Basel, Switzerland<br />5<br />Mehar Muhammad Ashfaq<br />
  14. 14. Basel I – 1988 Agreement<br />6<br />Mehar Muhammad Ashfaq<br />
  15. 15. Shortcomings of Basel I<br />Capital Required did not Mirror a Bank’s True Risk Profile.<br />Too Simple for Advanced Banks.<br />Inflexible Against New Developments.<br />Covers Only Credit and Market Risks.<br />Only Quantitative in Nature.<br />Limited Recognition of Collateral.<br />7<br />Mehar Muhammad Ashfaq<br />
  16. 16. Basel I - Achievements<br />Definition of Capital – First to be Internationally Accepted<br />Capital adequacy – First International Benchmark<br />Regulatory Capital Adequacy - Accepted<br />Soundness Indicator<br />Risk Management Orientation<br />Credit Risk: Simple Measure<br />Market Risk: Simple and Advanced Measures<br />Simple to Apply – Contributed to its Acceptance<br />Outcome: Basel I Adopted in over 100 Countries<br />8<br />Mehar Muhammad Ashfaq<br />
  17. 17. Global Developments & Basel I<br />Globalization<br />Growth in Cross-Border Trade, Finance&<br /> Investment.<br />Technological Advances<br />Computing Power and Storage<br />Networks and Communications<br />Financial Engineering (Development of Highly<br /> Sophisticated/Complex Products)<br />Above Causes are Reasons for Change…….<br />9<br />Mehar Muhammad Ashfaq<br />
  18. 18. 2006 …… Basel IIObjectives of Basel II<br />Greater Emphasis on Internal Assessment of Risk.<br />Comprehensive Framework for Credit, Market and Operational Risk.<br />Encourages Rigorous Bank Supervision.<br />Ensures Market Transparency, Disclosures.<br />More Risk sensitive; Better Align Regulatory Capital with Actual Risk Exposure.<br />10<br />Mehar Muhammad Ashfaq<br />
  19. 19. Overview of Basel II<br />11<br />Mehar Muhammad Ashfaq<br />
  20. 20. Difference: Basel I Vs Basel II<br />12<br />Mehar Muhammad Ashfaq<br />
  21. 21. Conclusion<br />Basel II as a law in EU.<br />1 January 2008 EU & US delayed January 2009.<br />Lenders Sophistication in Risk Management.<br />Tier 2 Capital: 8% of Risk-Weighted Assets.<br /> Tier 1 Capital: atleast 4% of Risk-Weighted Assets.<br />Thinking Point……….Sub-prime Financial Crisis.<br />13<br />Mehar Muhammad Ashfaq<br />
  22. 22. Thanksfor Listening…….<br />For Feedback<br />Mehar Muhammad Ashfaq<br />MBA Financial Management<br />ashfaq8585@hotmail.com<br />Coburg University of Applied Sciences-Germany<br />14<br />Mehar Muhammad Ashfaq<br />

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