Capital Requirements And Risk Management

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On September 12th, the 27 central banks in Switzerland finally unanimously adopted new banking regulatory agreement - the "Basel III", this agreement greatly enhance the regulatory industry to a minimum proportion of bank core capital requirements, this is a agreement after the financial crisis, the largest global regulatory reform achievements made by the banking sector.

Compared to more emphasis on banks ' own internal control and management, regulatory review process and market discipline, the introduction of IRB credit risk assessment, and the first introduction of operational risks associated with the capital requirements. Basel III is clearly newly adopted more concerned about the quality of capital and the ability of the bank 's
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Capital adequacy ratio will remain an important role in international banking supervision. Basel 3 agreements further clarified the importance of capital, known as the first pillar. The Basel Committee define that "the overriding objective is to promote international security and stability of the financial system", and adequate capital levels are considered a central element of this goal.

Basel III pillar 1 significantly enhance the core capital adequacy ratio required level for the banking sector, the new standard requires banks within eight years, in phases to constitute a capital requirement of ordinary shares increased to 7%, the capital adequacy level standard rates are need to set at 6%, which the banks are required to reserve not less than 2.5% of the bank 's risk capital buffer funds, if the bank failed to meet the requirements, the bank dividends, share buybacks and bonuses and other acts will be subject to have strict restrictions. At the same time, the agreement also requires banks to maintain 0-2.5% of the counter-cyclical regulatory capital, in order to effectively prevent hidden risk of bad debts cause by excessive lending during the boom years, and to help banks when economic downturn. Next, total assets core capital is called leverage ratio, leverage ratio of capital adequacy ratio is an important indicator of regulatory
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