Internship Report of Corporate Credit in Bank

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CHAPTER I INTRODUCTION 1.1 Background Basel Capital accord is a capital adequacy framework developed by the Basel committee. In 1988, the Basel Committee decided to introduce a capital measurement system commonly referred to as the Basel Capital Accord. This system provided for the implementation of a credit risk measurement framework with a minimum capital requirement of 8% on banks Risk Weighted Assets (RWA). The 1988 framework is also known as "Basel – I". Since 1988, this framework has been progressively introduced not only in member countries but also virtually in all other countries. The "international convergence on capital measurement and capital standard -2004" is popularly known as Basel-II. It is a capital…show more content…
The rationale of Basel II was to reduce the scope for regulatory arbitrage and make regulatory capital requirements more risk-sensitive by incorporating advances made in banks‟ internal risk management practices in calculating regulatory capital requirements. The „International Convergence of Capital Measurement and Capital Standards: A revised Framework‟, known as Basel II, was agreed in 2004 and consisted of three pillars corresponding to minimum regulatory capital requirements in Pillar 1, the supervisory review process in Pillar 2 and market discipline in Pillar 3. 1. First Pillar The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk, and market risk. Other risks are not considered fully quantifiable at this stage. Credit Risk | Operational Risk | Market Risk | -Standardized Approach-Foundation IRB Approach-Advanced IRB Approach | -Basic Indicator Approach- Standardized Approach-Advanced Measurement Approach | -Standardized Approach-Internal Model Approach | 2. Second Pillar This is a regulatory response to the first pillar, giving regulators better 'tools' over those previously available. It also provides a framework for dealing with systemic
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