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Basel III Important Sections

Basel III Important Sections

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Published by George Lekatis
Basel III Important Sections.

Basel iii Compliance Professionals Association (BiiiCPA)
http://www.basel-iii-association.com

The Basel iii Compliance Professionals Association (BiiiCPA) is the largest association of Basel iii Professionals in the world. It is a business unit of the Basel ii Compliance Professionals Association (BCPA), which is also the largest association of Basel ii Professionals in the world.

Receive (at no cost) the New Member Orientation newsletters:
http://www.basel-iii-association.com/New_Member_Orientation_Newsletters.html

Subscribe to Receive (at no cost) Basel II / Basel III Related News, Alerts, Opportunities, Updates, our Monthly Newsletter and Limited Time Offers for our Basel II / Basel III Training and Certification Programs:
http://forms.aweber.com/form/42/1586130642.htm
Basel III Important Sections.

Basel iii Compliance Professionals Association (BiiiCPA)
http://www.basel-iii-association.com

The Basel iii Compliance Professionals Association (BiiiCPA) is the largest association of Basel iii Professionals in the world. It is a business unit of the Basel ii Compliance Professionals Association (BCPA), which is also the largest association of Basel ii Professionals in the world.

Receive (at no cost) the New Member Orientation newsletters:
http://www.basel-iii-association.com/New_Member_Orientation_Newsletters.html

Subscribe to Receive (at no cost) Basel II / Basel III Related News, Alerts, Opportunities, Updates, our Monthly Newsletter and Limited Time Offers for our Basel II / Basel III Training and Certification Programs:
http://forms.aweber.com/form/42/1586130642.htm

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categoriesTypes, Research
Published by: George Lekatis on Mar 26, 2011
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06/14/2013

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Basel iii Compliance Professionals Association (BiiiCPA)www.basel-iii-association.com
1
Basel iii Compliance Professionals Association (BiiiCPA)
1200 G Street NW Suite 800 Washington, DC 20005-6705 USA Tel: 202-449-9750 Web: www.basel-iii-association.com
Basel III: A global regulatory framework for more resilientbanks and banking systemsDecember 2010, Bank for International SettlementsImportant Sections
A strong and resilient banking system is the foundation for sustainableeconomic growth, as banks are at the centre of the credit intermediationprocess between savers and investors.Moreover, banks provide critical services to consumers, small andmedium-sized enterprises, large corporate firms and governments whorely on them to conduct their daily business, both at a domestic andinternational level.One of the main reasons the economic and financial crisis, which beganin 2007, became so severe was that the banking sectors of many countrieshad built upexcessive on- and off-balance sheet leverage.This was accompanied by a gradual erosion of the level and quality of thecapital base. At the same time, many banks were holding insufficientliquidity buffers.The banking system therefore wasnot able to absorb the resultingsystemic trading and credit lossesnor could it cope with thereintermediation of large off-balance sheet exposures that had built up intheshadow banking system.The crisis was further amplified by aprocyclical deleveraging processandby theinterconnectedness of systemic institutions through an array of complex transactions.
 
 
Basel iii Compliance Professionals Association (BiiiCPA)www.basel-iii-association.com
2
During the most severe episode of the crisis,the market lost confidenceinthe solvency and liquidity of many banking institutions.The weaknesses in the banking sector were rapidly transmitted to the restof the financial system and the real economy, resulting in a massivecontraction of liquidity and credit availability.Ultimately the public sector had to step in with unprecedented injectionsof liquidity, capital support and guarantees, exposing taxpayers to largelosses.The effect on banks, financial systems and economies at the epicentre of the crisis was immediate.However, the crisis also spread to a wider circle of countries around theglobe.For these countries the transmission channels were less direct, resultingfrom a severe contraction in global liquidity, cross-border creditavailability and demand for exports.Given the scope and speed with which the recent and previous crises havebeen transmitted around the globe as well as the unpredictable nature of future crises, it is critical that all countries raise the resilience of theirbanking sectors to both internal and external shocks.To address the market failures revealed by the crisis, the Committee isintroducing a number of fundamental reformsto the internationalregulatory framework.The reformsstrengthen bank-level, or microprudential, regulation,whichwill help raise the resilience of individual banking institutions to periodsof stress.
 
 
Basel iii Compliance Professionals Association (BiiiCPA)www.basel-iii-association.com
3
The reforms also have amacroprudential focus, addressing system-widerisksthat can build up across the banking sector as well as the procyclicalamplification of these risks over time.Clearly these micro and macroprudential approaches to supervision areinterrelated, as greater resilience at the individual bank level reduces therisk of system-wide shocks.Strengthening the global capital framework The Basel Committee is raising the resilience of the banking sector bystrengthening the regulatory capital framework,building on the threepillars of the Basel II framework.The reforms raise both the quality and quantity of the regulatory capitalbase and enhance the risk coverage of the capital framework.They are underpinned by a leverage ratio that serves as a backstop to therisk-based capital measures, is intended to constrain excess leverage inthe banking system and provide an extra layer of protection against modelrisk and measurement error.Finally, the Committee is introducing a number of macroprudentialelements into the capital framework to help contain systemic risks arisingfrom procyclicality and from the interconnectedness of financialinstitutions.Raising the quality, consistency and transparency of the capital base
It is critical that banks’ risk exposures are backed by
a high quality capitalbase.The crisis demonstrated that credit losses and writedowns come out of 
retained earnings, which is part of banks’ tangible common equity base.
 

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