Basel III and the Continuing Evolution Of Bank Capital Regulation

Basel III and the Continuing Evolution Of Bank Capital Regulation Essay example
Finance & Accounting
Pages 12 (3012 words)
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Financial Services Table of Contents Introduction 3 Background to Basel III 5 Overview of the Key Elements of the Basel III Framework 8 Capital Ratios 8 Constituents of Capital 9 9 Leverage Ratio and Liquidity Ratios 9 Shortcomings of the Basel II That Could Not Prevent the Financial Crisis 10 Implications of the Proposals of Basel III Framework 11 The Sufficiency of Basel III Standards to Prevent a Further Financial Crisis 13 Conclusion 15 References 16 Bibliography 19 Introduction In the year 1988, the Basel Committee on Banking Supervision established a capital quantifying arrangement in banks.


The Basel Framework has ever since acted as a compulsory discipline for the banks and has contributed to the monetary power of the banking federation as a whole (Bank for International Settlements, 2011; Blundell-Wignall & Atkinson, 2010). The capital adequacy limits set by the Basel Committee on Banking Supervision on the banks are anticipated to decrease the insolvency perils of the banks. The ‘capital adequacy obligations’ of the banks necessitate them to enhance the percentage of equity in their portfolio as compared to the percentage of debt. The equity value of a bank acts as a buffer and protects the depositors from the risk of bank’s default of assets. Since the ‘capital adequacy obligations’ imposed by the Basel Accords necessitate the elevation of the equity levels in the bank, it consequently enhances the depositor protection. ...
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