Basel Iii Essay

Submitted By fazal78
Words: 1885
Pages: 8
Open Document
RBS Basel III

Basel III proposes many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. The capital standards and new capital buffers will require banks to hold more capital and higher quality of capital than under current Basel II rules. The new leverage ratio introduces a non-risk based measure to supplement the risk-based minimum capital requirements. The new liquidity ratios ensure that adequate funding is maintained in case of crisis.

| | | | | | | | | | | | | | | | | | Basel III | | | | | | | | | | | | | Basel II | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pillar I | | | Pillar II | | | Pillar III | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pillar I | | | Pillar II | | | Pillar III | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Enhanced Minimum | | | Enhanced | | | Enhanced Risk | | | | | | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | Supervisory | | | Disclosure | | | | Capital & Liquidity | | Supervisory Review | | | Disclosure & | | | | Capital | | | Review | | | & Market | | | | Requirements | | | Process for | | Market Discipline | | | | Requirements | | | Process | | | Discipline | | | | | | | | Firm-wide Risk | | | | | | | | | | | | | | | | | | | | | | | | | | Management and | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital Planning | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

Basel III strengthens the three Basel II pillars, especially pillar 1 with enhanced minimum capital and liquidity requirements.
The major elements of the proposals are noted below.

Regulatory Element | RBS Requirement | | | Higher Minimum Tier 1 | »» Tier 1 Capital Ratio: increases from 4% to 6% | Capital Requirement | »» The ratio will be set at 4.5% from 1 January 2013, 5.5% from 1 January 2014 and 6% | | from 1 January 2015 | | »» Predominance of common equity will now reach 82.3% of Tier 1 capital, inclusive of | | capital conservation buffer | New Capital Conservation Buffer | »» Used to absorb losses during periods of financial and economic stress | | »» Banks will be required to hold a capital conservation buffer of 2.5% to withstand | | future periods of stress bringing the total common equity requirement to 7% | | (4.5% common equity requirement and the 2.5% capital conservation buffer) | | »» The capital conservation buffer must be met exclusively with common equity | | »» Banks that do not maintain the capital conservation buffer will face restrictions on | | payouts of dividends, share buybacks and bonuses | Countercyclical Capital Buffer | »» A countercyclical buffer within a range of 0% - 2.5% of common equity or other fully | | loss absorbing capital will be implemented according to national circumstances | | »» When in effect, this is an extension to the conservation buffer | | |

Regulatory Element | Proposed Requirement | | | Higher Minimum Tier 1 | »» Tier 1 Common Equity Requirement: increase from 2% to 4.5% | Common Equity Requirement | »» The ratio will be set at 3.5% from 1 January 2013, 4% from 1 January 2014 and | | 4.5% from 1 January 2015 |
Show More

Related Documents: Basel Iii Essay

Gearing Up For Basel III Essays

• Cognizant Reports Gearing Up For Basel III Stringent data reporting and risk management requirements will compel banks to significantly overhaul their IT infrastructure to not only comply with sweeping regulatory change but also to power new operational efficiencies and create market differentiation. Executive Summary In its depth and scope, Basel III is unlike anything the banking business has seen. A combination of micro- and macro-prudential norms, the global regulatory mandate (which rolls…

Words 5000 - Pages 20

Sub-Prime Mortgage Essay

reforms and new Basel III emerge. Traditionally, compare to the regulation the banks will higher their capital requirement themselves. After the GFC, bank realise this is important and efficient to prevent their risk. With the higher regulation launched by the local government and by the global, bank has a much tight risk management within them. In addition, the risk manager must take a comprehensive view of all the possible risk for the short-term and long-term. Under the Basel III, the minimum…

Words 1238 - Pages 5

The Importance Of Capital Adequacy In Banking

into account factors that must be estimated by banks and approved by regulators. The document governing capital adequacy for banking institutions is referred to as the Basel Accord. Initially Basel utilized several fixed percentage weighting amounts for each asset of a bank. However, as assets became more complex, the Basel Accord was revised and set forth other methods to calculate various instruments using a variety of inputs. These inputs are often based on banks' internal forecasts and ratings…

Words 6019 - Pages 25

regulatory finance Essay

An Academic Response to Basel II By Jón Daníelsson, Paul Embrechts, Charles Goodhart, Con Keating, Felix Muennich, Olivier Renault and Hyun Song Shin SPECIAL PAPER NO 130 LSE Financial Markets Group an ESRC Research Centre Special Paper Series May 2001 ISSN 1359-9151-130 Submitted* in Response to the Basel Committee for Banking Supervision’s Request for Comments by Dr. Jón Daníelsson (LSE/FMG)+ Prof. Paul Embrechts (ETHZ) Prof. Charles Goodhart (LSE/FMG) Con Keating…

Words 6911 - Pages 28

Essay on Personal Statement Chavi Singhal

STATEMENT OF PURPOSE Chavi Singhal My fascination with computers began when I was around eleven, with a tank-based computer game – “Recoil”. Trying to navigate through the levels of the game kept me engrossed. This, in turn, developed an urge in me to figure out the underlying logics and algorithms of the game. Later on, the rise of the World Wide Web catered to my inquisitiveness: from understanding this sophisticated machine to decoding intricate puzzles. Consequently, I imbibed a deep interest…

Words 1020 - Pages 5

Essays: Capital Requirement and State Bank

06 dated October 28, 2005 on the above subject. 2. In order to further strengthen the solvency of individual bank/DFI, it has been decided to raise the Minimum Capital Requirements (MCR) as well as Capital Adequacy Ratio (CAR) calculated as per Basel II, as under: i) The minimum Paid up Capital requirements for all locally incorporated banks has been raised to Rs. 23 billion (net of losses) to be achieved in a phased manner as under: Minimum Paid up Capital (Net of losses) | Dead line by which…

Words 1586 - Pages 7

Collateralized Debt Obligation and John C .Hull Essay

Chapter 8 Securitization and the Credit Crisis of 2007 Options, Futures, and Other Derivatives 9th Edition, Copyright © John C. Hull 2014 1 Securitization Traditionally banks have funded loans with deposits Securitization is a way that loans can increase much faster than deposits Options, Futures, and Other Derivatives 9th Edition, Copyright © John C. Hull 2014 2 Asset Backed Security (Simplified) Senior Tranche Principal: $80 million Return = LIBOR + 60bp Asset 1 Asset 2 Asset 3  SPV…

Words 779 - Pages 4

Lecture 1 Powerpoint Essay example

BFF 5230 Global Financial Markets Lecture 1: Introduction to international financial markets Do you have a disability, medical or mental health condition that impacts on your study? The Disability Liaison Unit (DLU) provides a range of services for registered students including: • • • • Notetakers and Auslan interpreters Readings in alternative formats Adaptive equipment and software Alternative arrangements for exams For further information and details about how to register: Email: dlu@monash…

Words 4161 - Pages 17

Northern Rock Term Paper

------------------------------------------------- The Case of Northern Rock ------------------------------------------------- Table of Contents 1 Scope of Study 3 2 Introduction to the Northern Rock Debacle 3 2.1 Introduction to Northern Rock’s Business Model 4 3 Internal Analysis 7 3.1 Analysis of Northern Rock’s Balance Sheet 2006 7 3.1.1 Northern Rock’s Sources of Funding 7 3.1.2 Asset and Liability Maturity Mismatch 2006 8 3.1.3 Peer Group Ratio Comparison to Assess Northern…

Words 6715 - Pages 27

The Lehman Accounting Gimmick Partial Presentation Essays

Presentation Slides Outline: 1. Normal Cover Slide 2. Table of Contents 3. Economic and Financial Situation (Mortgage crisis; Lehman ratios) The U.S. Subprime Mortgage Crisis breaks out in the first half of 2007. It was triggered by a large decline in home prices and as one of the biggest mortgage backed securities underwriter, Lehman Brothers’ profitability and liquidity ratios started to getting worse. Lehman’s MBS and ABS assets started to lose in value according to mark to market prices. The…

Words 616 - Pages 3