{"id":1951,"date":"2024-03-30T14:12:44","date_gmt":"2024-03-30T08:42:44","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1951"},"modified":"2024-04-03T07:07:59","modified_gmt":"2024-04-03T01:37:59","slug":"q-basel-iii-accord-or-simply-basel-iii-often-seen-in-the-news-seeks-to","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-basel-iii-accord-or-simply-basel-iii-often-seen-in-the-news-seeks-to","title":{"rendered":"Q.\u00a0\u2018Basel III Accord\u2019 or simply \u2018Basel III\u2019, often seen in the news, seeks to"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>develop national strategies for the conservation and sustainable use of biological diversity<\/li>\n\n\n\n<li>improve banking sector\u2019s ability to deal with financial and economic stress and improve risk management<\/li>\n\n\n\n<li>reduce the greenhouse gas emissions but places a heavier burden on developed countries<\/li>\n\n\n\n<li>transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer:<\/strong>&nbsp;<strong>(b) improve banking sector\u2019s ability to deal with financial and economic stress and improve risk management<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"basel-norms\">Basel Norms:<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Basel norms or Basel accords are the&nbsp;<strong>international banking regulations issued by the Basel Committee on Banking Supervision.<\/strong><\/li>\n\n\n\n<li>The Basel norms is an effort to coordinate banking regulations across the globe, with the&nbsp;<strong>goal of strengthening the international banking system.<\/strong><\/li>\n\n\n\n<li>It is the&nbsp;<strong>set of the agreement by the Basel committee of Banking Supervision<\/strong>&nbsp;which focuses on the risks to banks and the financial system.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Basel committee on Banking Supervision<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>Basel Committee on Banking Supervision (BCBS)<\/strong>&nbsp;is the<strong>&nbsp;primary global standard setter for the prudential regulation of banks<\/strong>&nbsp;and provides a forum for regular cooperation on banking supervisory matters for the central banks of different countries.<\/li>\n\n\n\n<li>It was&nbsp;<strong>established by the Central Bank governors of the Group of Ten countries in 1974.<\/strong><\/li>\n\n\n\n<li>The committee expanded its membership in 2009 and then again in 2014. The BCBS&nbsp;<strong>now has 45 members from 28 Jurisdictions,<\/strong>&nbsp;consisting of Central Banks and authorities with responsibility of banking regulation.<\/li>\n\n\n\n<li>It provides a forum for regular cooperation on banking supervisory matters.<\/li>\n\n\n\n<li>Its objective is to enhance understanding of key supervisory issues and<strong>&nbsp;improve the quality of banking supervision worldwide.<\/strong><\/li>\n\n\n\n<li>The Basel Committee has issued three sets of regulations which are known as&nbsp;<strong>Basel-I, II, and III.<\/strong><\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"basel-iii-norms\">Basel III Norms<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Basel III is the&nbsp;<strong>regulatory norms for setting common standards for banks across different countries<\/strong>. The motive of Basel III norms is to&nbsp;<strong>enhance the regulation, supervision, and risk management in the banking industry.<\/strong><\/li>\n\n\n\n<li>The Basel III norms seek&nbsp;<strong>to improve the ability of banks to handle stress<\/strong>. The norms specify leverage ratios and capital requirements to regulate the working of banks.<\/li>\n\n\n\n<li>Basel III norms were<strong>&nbsp;introduced in 2009 post the credit crisis of 2008.<\/strong>&nbsp;The first version of Basel III was published in late 2009. It gave a window period of three years to meet the Basel III requirements.<\/li>\n\n\n\n<li><strong>Basel III norms have introduced strong capital ratios by increasing the minimum Tier 1 capital from 4% to 6%, and minimum Common Equity Tier 1 capital from 4% to 4.5%.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Bank\u2019s regulatory capital is divided into Tier 1 and Tier 2. Tier 1 capital is subdivided into Common Equity Tier 1 and additional Tier 1 capital. There is the highest level of subordination in security instruments of Tier 1 capital.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The new standards will come into effect on January 2023<\/li>\n\n\n\n<li><strong>Risk-based capital requirements<\/strong>&nbsp;(RWAs) and&nbsp;<strong>interest rate risk<\/strong>&nbsp;were introduced for the first time.<\/li>\n\n\n\n<li>The new standards aim at&nbsp;<strong>increasing capital requirements<\/strong>, it&nbsp;<strong>introduces requirements on liquid asset holdings and funding stability<\/strong><\/li>\n\n\n\n<li><strong>Key difference between the Basel II and Basel III<\/strong>: Basel III framework prescribes\u00a0<strong>more of common equity, creation of capital buffer, introduction of Leverage Ratio, Introduction of Liquidity coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Leverage Ratio<\/strong>: The leverage ratio is calculated by dividing Tier 1 capital by the bank\u2019s average total consolidated assets. Banks are expected to maintain a leverage ratio&nbsp;<strong>in excess of 3%<\/strong>&nbsp;under Basel III<\/li>\n\n\n\n<li><strong>Liquidity Coverage Ratio<\/strong>: The liquidity coverage ratio (LCR) denotes to highly liquid assets held by financial institutions to meet short-term obligations. The LCR is a requirement under Basel III for a bank to hold high-quality liquid assets (HQLAs) sufficient to cover 100% of its stressed net cash requirements over 30 days. The LCR is calculated as: LCR = HQLAs \/ Net cash outflows.<\/li>\n\n\n\n<li><strong>Net stable funding (NSF):<\/strong>&nbsp;The net stable funding is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Answer:&nbsp;(b) improve banking sector\u2019s ability to deal with financial and economic stress and improve risk management Basel Norms: Basel committee on Banking Supervision Basel III Norms<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[58],"class_list":["post-1951","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-58"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":58,"label":"2015"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1951"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1951\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1951"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}