Shredd: Ok, first of all, Basel is not this:
Basel is a set of international banking regulations which are all about defining the minimum capital requirements of financial institutions.
The motivation behind this is minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets.
Basel rules mean that the greater risk the bank is exposed to, the greater the capital needed to safeguard bank solvency and overall economic stability.
Now, Basel II is a 3-pillar concept that targets different types of risk; Pillar I: Minimum Capital Requirements, Pillar II: Supervisory Review Process and Pillar III: Market Discipline Requirements.
Commercial banks, Savings banks, Credit Institutions, Investment firms and trust Management companies must all comply with Basel II.
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apamalama: Could the Fed Reserve's failure to comply with Basel III hold up the IQD revaluation?
July 2, Fed Chairman Bernanke read a prepared statement declaring that the board members unanimously approved the agreements of Basel III. You can listen to it here:
http://www.c-span.org/ July 2, 2013
The Nations signatory to Basel III agreement had until Jan 2013 to implement. How long would it take Fed to implement? Do you think they will continue to procrastinate?
Thanks, Shredd. I appreciate your commitment to providing us the benefit of your experience and insight.
Shredd: "Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
1. improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
2. improve risk management and governance
3. strengthen banks' transparency and disclosures.
The reforms target:
1. bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
2. macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.
These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk of system wide shocks.
Basel III is part of the Committee's continuous effort to enhance the banking regulatory framework. It builds on the International Convergence of Capital Measurement and Capital Standards document (Basel II).
Compilation of documents that form the global regulatory framework for capital and liquidity (Basel II, Basel 2.5 and Basel III)