Basel 2 and 3 are international banking standards that establish capital reserve and liquidity requirements. Basel 2 was published in 2008 in response to bank failures, while Basel 3 was agreed in 2010-2011 to further strengthen regulations after the 2008 financial crisis. The goals are to reduce bank leverage and increase liquidity to minimize risks of future crises. Basel 2 and 3 implement three pillars - minimum capital requirements, supervisory review, and market discipline through disclosure. Basel 3 specifically focuses on bank reserves, risk sensitivity, and liquidity through ratios like the liquidity coverage ratio and net stable funding ratio.

1. Basel 2 & 3
Group No : 11

2. Md Monjurul Ahsan
ID: 19-099

3. Basel 2
 Initially published in June 2008
 Published by basel committee
 Intend to create a international standard of
capital funding against Financial & Operaional
risk
 Reduction of major bank collapse
 Difficult to impelement it before 2008

4. Basel 3
 Agreed by basel committee by 2010-11
 Introduced at 2013
Will be continued until 2015
 established to reduce bank leverage
 intend to increase bank lequidity

5. Objective of Basel 2
Ensure
Proper
Capital
Allocation
Allow
Market
Participant
to Assess
Capital
Taking Risk
by
Overviewing
Data
Reduce
Regulatory
Abridge

6. Update Time
September, 2005
November, 2005
July, 2006
November2007
January, 2009
July, 2008
July, 2009

7. Pillars of Basel 2
Minimum
Capital
Requirement
Supervisory
Review
Market Discipline

8. Md Ripon Molla

9. Minimum Capital Requirement
 Maintaining regulatory capital againgst risk
 3 types of risks are:
1. Credit risk
2. Operational risk
3. Market risk
 Internal Rating based Approach is applied for
credit risk
 Internal Risk Measurement is required for
operatonal risk measurement
Value of risk is required for market risk

10. Supervisory Review
 Regulatory response of Pillar one
 It provides a framework for systematic risk,
strategic risk, concentration risk
 instituion will review its risk management
system
It is a internal Capital Adequency Assessmet
process

11. Trird Pillar
Market
Discipline
&
Disclouser
Allow market participant to assess
institution’s adequency
Here everything of organization is
disclosed
It is done twice in a year

12. Basel 2 & Regulators
 Accommodation of differing culture
 Varying structural model
 Complexities of public policy & existing
regulation
 senior management determine the corporate
strategy

13. Basel 2 & Global Financial Crisis
 Improvement of Basel 2 due to financial crisis
 introduced Basel 3 (New version of Basel 2)
 Ensured better quality of capital in Basel 3
 Minimize the risk for capital market activities
 Better liquidity standard

14. Basel 3 Overview
 Focus on bank reserve
 focus on risk sensitivity
 Improvement along with Basel 2
 Focus on risk reduction

15. Basel 3 Principles
Capital
Requirement
Leverage
Ratio
Liquidity
Requirement

16. Lequidity Requirement
Maintain
liquidity
coverage ratio
Maintain net
stable funding
ratio

17. Implementation in Bangladesh
 Ensure capital requirement
 Ensure leverage ratio
 Ensure liquidity reserve

18. Impact of Basel 3
 GDP growth would be -.05% to −0.15%
 Increase of bank cost
 estimated basis point for 2015 is 15
 estimated basis point would be 50 by 2019
Active response from monetary policy

19. Criticism of Basel 3
 Hurt economic growth
 Reduction of GDP
 Negative affecting in the stability in the
financial system
 increasing incentive of banks