The Implementation Of Basel IIi

Basel III is a regulatory reform measures to improve the banking regulation, supervision and risk management. Basel III was published in 2009 and mainly because of widespread of credit crisis of global banking system. Therefore, the banks must maintain sufficient capital and proper leverage at any point in time. We also know that Basel III is implemented right after Basel I and II, its main changes are to enhance the stability of banking system when facing financial crisis and economic downturn. Apart from that, the content of banks’ risk management and transparency are also strengthened. The volatility of banking system can thus be reduced through strictly enforced Basel III standard and requirements.

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

Investment Banking is now at a crucial junction, where Investment and Commercial Banking are splitting up due to the ring fence which is being built around these two banking areas. As well, the new upcoming regulation, Basel III, will have a huge impact in the investment banks, with higher liquidity and capital requirements, in order to increase solvency and stability in financial industries.

Basel III is another law implemented that will place additional strain on Banks. Basel III is a set of reform measures, developed by the Basel Committee on Banking Supervision. It is a framework used to strengthen risk management and a banks ability to absorb shocks from financial and economic stress. Basel III implemented new tier 1 capital requirements, new minimum leverage ratio requirements and new liquidity coverage ratios requirements. Community banks enjoyed a small victory by delaying the final implementation requirements for Basel III to March 31, 2019.

On 4th February 2013 the Financial Services (Banking Reform) Bill (the Bill) was introduced to Parliament. This Bill has sought to implement the ring-fencing proposals of the UK Independent Commission of Banking (ICB), which is also known as the Vickers report. The Bill also represents the UK’s response to wider international calls to structurally reform banks, such as the Liikanen reports’ proposals on reforming the structure of the EU banking sector .

The regulatory reform process is currently moving from policymaking to the implementation phase. The implications of regulatory reform for banks has never been greater, and the ability to navigate the new environment will require strong processes that integrate regulatory compliance and changes to the business model. Planning has never been more important as reaction to each regulation could be very costly.

The phased introduction of new banks in the private sector and expansion in the number of foreign banks provided for a new level of competition. Furthermore, increasingly tight capital adequacy norms, prudential and supervision norms were to apply equally across all banks, regardless of their ownership. [34]

Banking sector reforms in India has progressed promptly on aspects like interest rate deregulation, reduction in statutory reserve requirements, prudential norms for interest rates, asset classification, income recognition and provisioning. But it could not match the pace with which it was expected to do. The accomplishment of these norms at the execution stages without restructuring the banking sector as such is creating havoc

• Governance and oversight: Assessing business model and strategy changes and reinforcing the importance of sound corporate governance appropriate for the size and complexity of the individual bank. A specific focus will be on determining the adequacy of strategic, capital, and succession planning. Examiners will assess whether the plan is appropriate in light of the risks in new products or services. If applicable, examiners will assess the bank’s merger and acquisition processes and procedures.

In past, Schedule I Banks ought to be widely held by a large number of shareholders, originally with no investor holding more than 10% and foreign ownership was previously limited to 25%. However, these rules have been changed according to a new legislative policy framework introduced in June of 2000. Under the new rules, there are three sub-classes of banks, based on the size of their equity capital: 1) large (greater than $5 billion); 2) medium ($1 to $5 billion); and 3) small (less than $1 billion). Based on present figures, the $5 billion cut-off point would establish the top six Schedule I Banks as large banks, except the National Bank (although it would be classified as such until deemed otherwise by the Minister of Finance). The large banks have to remain widely held under new criteria that eliminate the 25% foreign ownership rule, and permit a single investor to own up to 20% of the voting shares of the bank, and up to 30% of non-voting shares, subject to a ¡°fit-and proper¡± test designed to evaluate their character and suitability. Medium banks would be allowed to have a single owner hold up to 65% of shareholdings and would be required to maintain a public float of at least 35% of voting shares. Small banks would face no ownership restrictions other than the ¡°fit and proper¡± test. Following the reform, the nationality is no longer a

The pre-Basel III requirement for major banks is APS 210. APS210 requires financial institutions liquidity must suffice for two operating scenarios: going-concern scenario, to model the expected behavior of CFs in the ordinary course of business for at least 15 months; and bank-specific name crisis, which requires available liquidity to keep the bank operating for at least five business days. According to APRA, HQLA include cash, bank bills and CDs issued by financial institutions and at-call deposits (APRA, 2008).

Banks are mainly regulated by the Central Bank of Sri Lanka (CBSL) - the apex financial regulator, under the Banking Act No. 30 of 1988, Monetary Law Act No. 58 of 1946 and Exchange Control Act No. 24 of 1953. Since it is mandatory for banks to be listed, regulations issued by Securities and Exchange Commission (SEC) are also directly applicable. But it is important to remember that managing regulatory risk is not limited to the regulations of CBSL and SEC, but extends to all the applicable local and international regulations such as labour laws, environmental laws, antitrust laws and tax regulations

Facing the problems posed by an unstable global financing market, the BCBS set the following intertwined goals: to develop a comprehensive set of standards on capital flows, to implement those standards in the absence of legitimate international treaties or law, and for that to happen, to maximize their own enforcement power through guidance and supervision. It is in the interest of every nation to maintain its own competitiveness while refraining from harming the stability of the global financial system. However, these two goals are not always compatible with one another.

Bank for International Settlements. (n.d.). The Basel Committee 's work. Retrieved November 4, 2014, from http://www.bis.org/bcbs/bcbs_work.htm

The LCR has been implemented since 1st January 2015, but the minimum requirement was set starting at 60% and increase in equal annual steps to reach 100% by 1st January 2019. The LCR is ensured through this approach so that it can be introduced without material disruption to the orderly strengthening of banking systems.