20. BASEL NORMS Flashcards
MAIN PURPOSE OF BASEL NORMS
BANK FALIURE, LOSING DEPOSITORS MONEY
BASEL NORM IS CREATED BY
BIS - BANK FOR INSTERNATIONAL STTTLEMENTS
WHERE IS HQ OF BIS
BASEL, SWITZERLAND
MEMBER CONTRIES MEETING OCCOURENCE IN EVERY
2 MONTHS
WHAT IS BASEL ACCORDS
WHAT IS FULL FORM OF BCBS ?
BASEL COMMITTEE FOR BANKIG SUPERVISION
TOTAL NUMBER OF MEMBERS COUNTRIES IN COMMITTEE BCBS
28 MEMBER NATION
3 TYPES OF RISK THAT BANK FACES
What are Basel Norms?
Global banking regulations developed by BCBS to manage risk and ensure financial stability.
Where is BCBS headquartered?
Basel, Switzerland, at the Bank for International Settlements (BIS).
What is the primary goal of Basel Accords?
To ensure financial institutions have enough capital to absorb unexpected losses.
When was Basel I introduced, and what was its focus?
1988, focused on credit risk with a minimum capital requirement of 8%.
When did India adopt Basel I guidelines?
1999
What are the three pillars of Basel II?
Capital Adequacy Requirements, Supervisory Review, Market Discipline.
What is the minimum capital adequacy requirement under Basel II?
8% of risk-weighted assets.
What is Market Discipline under Basel II?
Banks must disclose CAR, risk exposure, and financial details.
Why was Basel III introduced?
To strengthen banks against financial stress after the 2008 crisis.
What are the key focuses of Basel III?
Capital, leverage, funding, and liquidity.
What is CRAR?
Capital to Risk Weighted Asset Ratio, measuring a bank’s capital against risk-weighted assets.
What is the Basel III minimum capital requirement?
10.5%, including a 2.5% capital conservation buffer.
What is India’s Capital Adequacy Requirement under Basel III?
11.5%, including a 2.5% buffer.
What are the two types of capital under Basel III?
Tier 1 (Equity) and Tier 2 (Bonds).
What is the role of the Capital Conservation Buffer?
An additional 2.5% cushion for banks during financial stress.
What happens if a bank fails to maintain the Capital Conservation Buffer?
Restrictions on dividend distribution and bonuses.
What is the Leverage Ratio under Basel III?
A measure to limit excessive borrowing by banks.
What is the minimum leverage ratio under Basel III?
0.03
What is the Net Stable Funding Ratio (NSFR)?
Ensures banks maintain stable funding over a one-year period.
What is the Liquidity Coverage Ratio (LCR)?
Banks must hold enough high-quality liquid assets for 30 days of cash outflows.
How does Basel III address systemically important banks?
Imposes additional capital requirements on ‘Too Big to Fail’ banks.
What is the Countercyclical Capital Buffer?
Extra capital to be maintained in good times to absorb downturn losses.
How does Basel III impact bank lending?
Higher capital requirements limit excessive lending but improve stability.
What is the role of the Basel Committee?
Sets global banking regulations to reduce financial crises.
Why do banks need to maintain higher capital under Basel III?
To absorb financial shocks and prevent banking crises.
How does Basel III improve risk management?
Requires better risk assessment and governance policies.
How does Basel III affect transparency?
Banks must disclose more financial information to regulators and the public.
What are Systemically Important Banks (SIBs)?
Large banks whose failure could cause major economic disruption.
How do Basel Norms protect depositors?
Ensuring banks have enough capital to cover financial risks.
What is the future of Basel regulations?
Continuous updates to adapt to evolving financial risks and improve stability.
