After Basel 1 and Basel II now the time has come for implementing Basel III
From 2013, banks across the word likely to start implementing the Basel III norms. The Bank of International Settlement, an international banking body with majority of central banks as its members, through a committee on banking supervision, known as BCBS, are setting out some rules for banks globally. Those rules pertain to assessing risks, banks’ capital requirement in line with their risk profile and others. Implementation of Basel III is likely to be done in phased manner between 2013 and 2019. Basel III need to be implemented due to the not so good experience of USA & European Banks in 2008 economic crisis and also present European crisis wherein some big banks had crashed and in the verge of collaspe . Basel III guidelines propose to enhance the quality of banks’ capital by enlarging the equity capital (equity + reserves) requirement .Banks will be required to raise capital adequacy ratio (CAR) from 8% (in Basel II) to 10.50% in Basel III. This means, Bankers are required to set aside Rs 10.50 for every Rs 100 funding. Indian Central Bank has already stipulated minimum CAR at 9%. Central banks of each Country can prescribe an additional 2.5%, which would increase total CAR requirement to 13%.
Higher CAR and stricter Basel III norms will definitely protect the Depositors & other stake holders interest .
From 2013, banks across the word likely to start implementing the Basel III norms. The Bank of International Settlement, an international banking body with majority of central banks as its members, through a committee on banking supervision, known as BCBS, are setting out some rules for banks globally. Those rules pertain to assessing risks, banks’ capital requirement in line with their risk profile and others. Implementation of Basel III is likely to be done in phased manner between 2013 and 2019. Basel III need to be implemented due to the not so good experience of USA & European Banks in 2008 economic crisis and also present European crisis wherein some big banks had crashed and in the verge of collaspe . Basel III guidelines propose to enhance the quality of banks’ capital by enlarging the equity capital (equity + reserves) requirement .Banks will be required to raise capital adequacy ratio (CAR) from 8% (in Basel II) to 10.50% in Basel III. This means, Bankers are required to set aside Rs 10.50 for every Rs 100 funding. Indian Central Bank has already stipulated minimum CAR at 9%. Central banks of each Country can prescribe an additional 2.5%, which would increase total CAR requirement to 13%.
Higher CAR and stricter Basel III norms will definitely protect the Depositors & other stake holders interest .
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