Basel III Objectives Of Basel Bank

Bank of Baroda is one of the leading commercial and retail banks of India, which increasing presence in foreign markets too.The bank holds a strong position in the Indian banking industry and witnessed a Y-o-Y growth of ~20% in its global business. The bank has been making continuous efforts to diversify its business and focus more on the areas like retail, MSME and agriculture credit. The bank holds a strong capital base too, with current Capital Adequacy Ratio standing at 12.28% under the BASEL III norms. The bank also saw a decline in its NPAs, although it is not quite sure that whether this trend is expected to be continued in future as well or not. Moreover, the bank’s management has stated the bank is going through the last phases of its restructuring programs, indicating that the

The Dodd-Frank Act put a considerable burden on financial regulators whom have to work out the details in order to implement its vision. It includes a variety of points relating to the prevention of a future crisis (Kim & Muldoon 2015). Some of these major points include: (1) The creation of a new Financial Stability Oversight Council, comprising existing regulators, to be responsible for overseeing any financial institution or set of market circumstances determined to be likely to result in risk to the overall economy, (2) A reallocation of banking oversight responsibility among the Federal Reserve System, the Comptroller of the Currency, and the FDIC, requiring the Federal Reserve Board to supervise nonbank financial companies “that may

Basel III is a global comprehensive collection of restructured regulatory standards on bank capital adequacy and liquidity. It was developed by the Basel Committee on Banking Supervision to strengthen the regulation, supervision and risk management of the banking sector (bis.org, 2010). It introduces new regulatory requirements on bank liquidity and bank leverage in response to the financial downturn caused by the Global Financial Crisis. Stefan Walter, Secretary General of the Basel Committee on banking supervision said in November 2010:

Basel III is another law implemented that will place additional strain on Banks. Basel III is a set of reform measures, developed by the Basel Committee on Banking Supervision. It is a framework used to strengthen risk management and a banks ability to absorb shocks from financial and economic stress. Basel III implemented new tier 1 capital requirements, new minimum leverage ratio requirements and new liquidity coverage ratios requirements. Community banks enjoyed a small victory by delaying the final implementation requirements for Basel III to March 31, 2019.

The American Banking system has always focused on order, resiliency and the ability to withstand the storm. When comparing banking systems, it is required analyze both the strengths and the weaknesses of each system. While examining the American banking system, a key strength that is presented is the pride if its resiliency, “these improvements in the resiliency of the banking system have been reinforced by a series of key capital and liquidity rules that have been enacted in the United States, including the Basel III capital and liquidity frameworks as adopted in more stringent form” (The State of American Banking).

With this title two new government departments are created The Financial stability Oversight Council and the Office of Financial Research. The authority of the Board of Governors of the Federal Reserve System is it expanded also to allow them to supervise nonbank financial companies and certain bank holding companies that could affect the health of the country’s economy.

Banks play vital role and are key elements of global economic activities. So the global trend to do

The greater proportion of capital to total funds, the greater the protection to depositors. Banks maintain much lower capital levels than other businesses; currently bank capital accounts for 10% of total funds. Bankers prefer to use high amounts of leverage because they understand the role of leverage in increasing ROE. Banks believe that long term profit maximization can be best achieved if their banks are highly leveraged. Regulators are more concerned about the risk of bank failure, rather than the profits of the individual banks; their concern is protecting the economy from widespread bank distress.

The global financial crisis has raised many concerns for the need to restructure the approach of risk and regulation in the financial sector (KPMG 2011). Figure. 4 has shown the structures of Basel III. It aims to increase the capital and liquidity of banks and therefore maintaining the stability in banking sector with full effect in 2019 (Banks For International Settlements 2011).

21. Banerjee Amalesh and Singh S.K. (2002), Banking and Financial Sector Reforms in India, Deep and Deep Publications Pvt. Ltd., New Delhi-p.265 (Report of K. Madahav Rao Committee (1979)

Among saving possible failing financial institutions, other goals of this institution includes preventing possible panic from spreading to the populace, preventing possible bank runs from happening also avoiding bankruptcy spreading from one bank to another due to liquidity issues.

2. Financial stability – Bank of Thailand sets rules and regulations to ensure smooth operations in the financial system and enhance supervision potential to tackle systematic risk.

Basel III is a set of proposed changes to international capital and liquidity requirements and some other related areas of banking supervision. It is the second major revision to an original set of rules, now known as Basel I, which was promulgated by the Basel Committee in 1988. The committee was established in the mid‐1970’s, after the failure of a small German bank (Herstatt) sent shudders through the global financial system as a result of poor coordination between national regulators. The Basel Committee is composed of banking regulators from a number of industrialized countries, with a core membership concentrated in the traditional banking powers within Europe, plus the US and

As a risk manager of Marylebone Bank, the primary aim is making sure the bank’s capital achieve an appropriate level to meet the obligations, be able to pay off the risk-taking and bear the expense of unexpected losses. The Basel accord is applied as a guideline to maintain the risk rate to minimum, avoiding financial clashes. The report examines variety of methods in order to estimate three key risk capital charges in financial institutional management, which are market risk, credit risk and operational risk.

Since 2008 sub-prime mortgage crisis was happened, the banking sector had received unprecedented impact. Some severe cases that are bankrupting of banks and banks took over by the government were continually happened. Under enormous pressure, banks constantly look for new ways to earn more money to make up for previous losses. They all want to come out from the financial crisis as soon as possible but the fact is not the same as the expectation.