Table of Contents
Q) 15 ‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to
- (a) develop national strategies for the conservation and sustainable use of biological diversity.
- (b) improve banking sector’s ability to deal with financial and economic stress and improve risk management.
- (c) reduce the greenhouse gas emissions but places a heavier burden on developed countries.
- (d) transfer technology from developed Countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals.
Q) Consider the following statements:
- Basel norms are mandatory for every member nation.
- India has implemented all the requirements in Basel III norms.
Which of these is/are correct?
a) Only 1
b) Only 2
c) Both
d) None
WHY IN THE NEWS?
- Findings of the Regulatory Consistency Assessment Programme (RCAP) of the Basel Committee on Banking Supervision (BCBS) was released.
- The large exposure regulations in India have been assessed as “Compliant” with the Basel large exposures (LEX) framework.
- The Committee assessed this compliance as of the highest possible grade.
REGULATORY CONSISTENCY ASSESSMENT PROGRAMME (RCAP)
- RCAP est. in 2012 is part of BASEL committee.
- It monitor and assess the adoption and implementation of its standards, while encouraging a predictable and transparent regulatory environment for internationally active banks.
- The assessment team was led by Vasily Pozdyshev, Deputy Governor of the Central Bank of the Russian Federation.
- It comprised four technical experts, from Belgium, Brazil, Denmark and the Basel Committee Secretariat.
BASEL COMMITTEE ON BANKING SUPERVISION (BCBS)
- It was established by the central bank governors of the Group of Ten countries in 1974.
- The committee is the primary global standard setter for the prudential regulation of banks.
- Its 45 members comprise central banks and bank supervisors from 28 jurisdictions.
NON-PERFORMING ASSETS
ALL ABOUT BASEL NORMS
- Basel is a city in Switzerland.
- Also the headquarters of Bureau of International Settlement (BIS).
- Basel guidelines refer to broad supervisory standards formulated by the group of central banks- called the Basel Committee on Banking Supervision (BCBS).
- The set of agreement by the BCBS are called Basel accord.
- These agreements focuses on risk to banks and the financial system.
- The main purpose of the accord is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.
BASEL- 1
- Introduced in 1988.
- It basically says that if banks have enough capital to cover the risks they have invested in, then the bank is safe.
- The minimum capital requirement {CAR in India} was fixed at 8% of risk weighted assets (RWA).
- RWA means assets with different risk profiles.
- India adopted Basel 1 guidelines in 1999.
BASEL- 2
- Introduced in 2004.
- It’s basically Basel 1 + 2 more.
- First, Banks need to develop better risk management techniques & increase disclosure (transparency).
- Second, Banks need to mandatorily disclose their risk exposure to the central bank.
- Hence, bi-annual Financial Stability Reports by the RBI.
Q) Consider the following statements about Financial Stability and Development Council:
- It is a statutory body est. in 2010.
- RBI Governor chairs the meeting of FSDC.
Which of these is/are correct?
a) Only 1
b) Only 2
c) Both
d) None
BASEL- 3
- Introduced in 2010 in response to financial crisis of 2008.
- It aims at making most banking activities more capital-intensive.
- A more resilient banking system by focusing on four parameterscapital, leverage, funding and liquidity.
- India has extended the deadline to meet all the requirements under basel 3 to March 2020.
Q) Consider the following statements:
- Basel norms are mandatory for every member nation.
- India has implemented all the requirements in Basel III norms.
Which of these is/are correct?
a) Only 1
b) Only 2
c) Both
d) None
Q) Consider the following statements about Financial Stability and Development Council:
- It is a statutory body est. in 2010.
- RBI Governor chairs the meeting of FSDC.
Which of these is/are correct?
a) Only 1
b) Only 2
c) Both
d) None
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