Reasons for Implementing Basel Iii

3581 WordsApr 6, 201215 Pages
Reasons for Implementing Basel III and Its Costs On Developed and Developing Countries The global financial crisis (GFC) was a painful wound that marked the twentieth century. It was the greatest crisis the humanity has witnessed since 1930 (the great depression). It first started in the United States and spread then to the entire world and caused a considerable slowdown in most developed countries and has affected the financial markets and the growth prospects in developing countries. It is called the doubled jeopardy crisis as it spread rapidly with a contagious effect to the other countries of the world. Despite the efforts exerted by governments and central banks to rescue the economy from this huge recession through aggressive…show more content…
To avoid a reoccurrence of a financial crisis with that expansion and to protect the human beings from its withdrawals the committee of Basel decided to reform the Basel II and to upgrade it to a stricter system with more regulations on the market. Basel committee consists of a group of banks representatives that meet once every three months to enhance the efficiency of the banking sector in a fair and consistent framework. They started by drafting Basel I in 1988, then upgraded it to a more sophisticated one in 2006 and finally drafted Basel III in 2011. This latter is our concern in this term paper. Basel committee on banking supervision and the financial stability board, which consists of 29 members: 2 non-voting and 27 voting, tailored Basel III accord. All through 2008 and 2009 they studied and design the Basel III requirement and revised it through extensive consultation over the year 2010. After the global financial crisis and after feeling its huge negative impacts on people lives, the implementation of Basel accord III became mandatory and the country that wont abide by it won’t have access to loans nor from large donors nations, nor from commercial banks, nor from IMF and World Bank. Also these countries won’t be allowed to issue any foreign derivatives. By the year 2013 each country should be ready to start implementing Basel III requirement and meeting them
Open Document