The And Soundness And Stability Of The International Banking System

1788 WordsJan 5, 20168 Pages
A. Basel I contained two primary objectives, the first is to help to strengthen the soundness and stability of the international banking system, the second is to alleviate competitive inequalities. Basel I not only increases sensitivity of regulatory capital differences in risk profiles, in addition, it considers about balance sheet exposures when assessments of capital adequacy are undertaken(Ojo, Marianne 2011). However, the framework also discourages banks to keep liquid and low risk assets, and it is hard to evaluate whether the minimum capital requirements for banks do harm to their competitivesness or not and whether this framework increase competitives inequalities amongst banks or not. Basel I focus more on credit risks instead of the operation risk, which bank face day-to-day problems in their business. In order to deal with this problem, Basel II creats an international standard about the quantity of capital provisions the bank should to guard against financial and operational risks they face. Basel II was established to achieve three committee objectives, first is to increase the quality and the stability of the international banking system, second is to create and maintain a level playing field for internationally active banks, the last one is to promote the adoption of more stringent practices in the risk management (Saidenberg et al., 2003). First two goals are important part of 1988 Accord while the third one is new regulatiton to the systems. The need for
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