Banking: an Overview on Implementation of Basel Iii Guidelines
RBI Guidelines for Implementation of Basel III Guidelines - An overview
BackGround for Basel III : In a separate article I have already discussed the details of the Basel III accord as released by Basel Committee on Banking Supervision. In this article we will be dealing with the broad guidelines as issued by RBI for implementation of Basel 3 Accord. We are aware that originally Basel Committee was formed in 1974 by a group of central bank governors from 10 countries. Earlier guidelines were known as Basel I and Basel II accords. Later on the committee was expanded to include members from nearly 30 countries , including India. Inspite of implementation of Basel I and II guidelines, the financial world saw the worst crisis in early 2008 and whole financial markets tumbled. One of the major debacles was the fall of Lehman Brothers. One of the interesting comments on the Balance Sheet of Lehman Brothers read : “Whatever was on the left-hand side (liabilities) was not right and whatever was on the right-hand side (assets) was not left.” Thus, it became necessary to re-visit Basel II and plug the loopholes and make Basel norms more stringent and wider in scope. BCBS, through Basel III, put forward norms aimed at strengthening both sides of balance sheets of banks viz. (a) enhancing the quantum of common equity; (b) improving the quality of capital base (c) creation of capital buffers to absorb shocks; (d) improving liquidity of assets (e) optimising the leverage through Leverage Ratio (f) creating more space for banking supervision by regulators under Pillar II and (g) bringing further transparency and market discipline under Pillar III. Thus, Basel III norms were released by BCBS and individual central banks were asked to implement these in a phased manner. RBI (India's central bank) too issued draft guidelines in the initial stage and then came up with the final guidelines.
Over View f the RBI Guidelines for
BackGround for Basel III : In a separate article I have already discussed the details of the Basel III accord as released by Basel Committee on Banking Supervision. In this article we will be dealing with the broad guidelines as issued by RBI for implementation of Basel 3 Accord. We are aware that originally Basel Committee was formed in 1974 by a group of central bank governors from 10 countries. Earlier guidelines were known as Basel I and Basel II accords. Later on the committee was expanded to include members from nearly 30 countries , including India. Inspite of implementation of Basel I and II guidelines, the financial world saw the worst crisis in early 2008 and whole financial markets tumbled. One of the major debacles was the fall of Lehman Brothers. One of the interesting comments on the Balance Sheet of Lehman Brothers read : “Whatever was on the left-hand side (liabilities) was not right and whatever was on the right-hand side (assets) was not left.” Thus, it became necessary to re-visit Basel II and plug the loopholes and make Basel norms more stringent and wider in scope. BCBS, through Basel III, put forward norms aimed at strengthening both sides of balance sheets of banks viz. (a) enhancing the quantum of common equity; (b) improving the quality of capital base (c) creation of capital buffers to absorb shocks; (d) improving liquidity of assets (e) optimising the leverage through Leverage Ratio (f) creating more space for banking supervision by regulators under Pillar II and (g) bringing further transparency and market discipline under Pillar III. Thus, Basel III norms were released by BCBS and individual central banks were asked to implement these in a phased manner. RBI (India's central bank) too issued draft guidelines in the initial stage and then came up with the final guidelines.
Over View f the RBI Guidelines for