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PDF International Convergence of Capital Measurement and Capital

1 This report presents the outcome of the Basel Committee on Banking Supervision’s (“the Committee”)1 work over recent years to secure international convergence on revisions to supervisory regulations governing the capital adequacy of internationally active banks

PDF GRADUATE SCHOOL OF BUSINESS STANFORD UNIVERSITY KNIGHT

The Basel III bank-regulation proposals that G20 leaders will discuss fail to eliminate key structural flaws in the current system Banks’ high leverage and the resulting fragility and systemic risk contributed to the near collapse of the financial system Basel III is far from sufficient to protect the system from recurring crises

PDF The Basel Framework

The Basel framework is applied on a consolidated basis to internationally active banks It captures the risks of a whole banking group Although the framework recognises the need for adequate capitalisation on a stand-alone basis it does not prescribe how to measure the solo capital requirements which is left to individual supervisory authorities

  • Are international banks subject to Basel III standards?

    Internationally active banks in BCBS member countries are expected to be subject to the Basel III standards, but such expectation does not apply to smaller banks operating in less complex financial environments. The BCP assessment considers all the different elements of a sound supervisory frameworks and flags potential weaknesses.

  • How did Basel III change the capital framework?

    Basel III changed the structure of the capital framework by creating three independent minimum capital ratios and supplementing them with buffers that can be drawn down in periods of stress (Figure 2). Banks are required to meet different ratios of common equity, Tier 1, and total capital.

  • What are the 2 and 3 Pillars of Basel Capital?

    The Second and Third Pillars Pillars 2 and 3 are key components of the Basel capital framework. A robust implementation of Pillar 2, including banks’ assessment of their capital adequacy and supervisors review of such assessment, is critical to ensure that risks not appropriately covered under the Pillar 1 are taken

  • What is the Basel framework?

    The Basel Framework is the full set of standards of the Basel Committee on Banking Supervision (BCBS), which is the primary global standard setter for the prudential regulation of banks. The membership of the BCBS has agreed to fully implement these standards and apply them to the internationally active banks in their jurisdictions.

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