Key Elements For The Basel IIi Capital Adequacy Framework

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1. Introduction
In the aftermath of the financial crisis of 2007 – 2009, the Basel Committee of Banking Supervision launched a program that substantially revised the existing capital adequacy guidelines. As a result, the Committee released a new version of bank capital and liquidity standards, referred to as “Basel III”, in December 2010. Subsequent guidance was issued in January 2011 regarding minimum requirements for regulatory capital instruments. The G20 , including United States and the European Union, publicly endorsed the Basel III standards at their November 2010 Summit in Seoul, and relevant countries around the world have made efforts to study its impacts on their banking industry and to find the best ways to implement them into law in their respective jurisdictions. There have been numerous worldwide debates and discussions since its introduction. However, the core principle of more stringent capital requirement has not been changed and it is now unavoidable for impacted financial institutions to comply with the new standards. The purpose of this paper is to summarize the key elements for the Basel III capital adequacy framework and discuss its practical implications on the financial industry.
2. Background of Basel Committee and Its Accords
The Basel Committee on Banking Supervision (BCBS) was originated from the collapse of the Bretton Woods system in 1973 that was followed by the financial market turmoil. The failure of Bretton Woods caused large foreign

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