BCBS is a committee of banking
supervisory authorities that were established by the central bank governors of the
G-10 countries in 1974 with a proposal of working towards building new
international financial structures with the goal of minimizing credit risk in
financial sector. Basel accord is the guidelines on regulatory standards
formulated by the Basel Committee on banking supervision (BCBS). The
BCBS has so far introduced a capital measurement system commonly referred to as
Basel I, Basel II and Basel III,
which seeks to improve the banking sector’s ability to deal with financial
stress, improve risk management and strengthen the banks’ transparency.
The important Key elements of BASEL III and the difference from BASEL II can be understood as follows:
Requirements
|
BASEL II
|
BASEL III
|
Capital conservation buffers to RWAs
|
None
|
2.5%
|
Minimum ratio of total capital to RWAs
|
8%
|
10.50%
|
Minimum ratio of common equity RWAs
|
2%
|
4.5%
|
Tier I capital to RWAs
|
4%
|
6%
|
Leverage Ratio
|
None
|
3%
|
Counter Cyclical buffer
|
None
|
0% to 2.50%
|
Minimum liquidity coverage ratio
|
None
|
TBD
|
Net stable funding ration
|
None
|
TBD
|
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