25-06-2012, 05:25 PM
SEMINAR ON BASEL NORMS
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FOUNDATION
Established on 17 May 1930
The BIS is the world’s oldest international financial organization
Head office is in Basel, Switzerland and representative offices in Hong Kong SAR and in Mexico City.
The BIS currently employs around 550 staff from 50 countries.
BASEL COMMITTEE ON BANKING SUPERVISION
A set of agreements
Regulations and recommendations on Credit risk , market risk and operational risk
Purpose – to have enough capital on account to meet obligations and absorb unexpected losses
PURPOSE OF BASEL 1
Strengthen the stability of international banking system.
Set up a fair and a consistent international banking system in order to decrease competitive inequality among international banks
STRUCTURE OF BASEL I
Minimum Capital Adequacy ratio was set at 8% and was adjusted by a loan’s credit risk weight.
Credit risk was divided into 5 categories viz. 0%, 10%, 20%, 50% and 100%.
Commercial loans, for example, were assigned to the 100% risk weight category.
To calculate required capital, a bank would multiply the assets in each risk category by the category’s risk weight and then multiply the result by 8%. Thus, a Rs 100 commercial loan would be multiplied by 100% and then by 8%, resulting in a capital requirement of Rs8.
BASEL NORMS V/S INDIAN BANKING SYSTEM
Basel Accord I. was established in 1988 and was implemented by 1992 in India.
over 3 years – banks with branches abroad were required to comply fully by end March 1994 and the other banks were required to comply by end March 1996.
RBI norms on capital adequacy at 9% are more stringent than Basel Committee stipulation of 8%.
Commercial Banks , Cooperative Banks and Regional rural banks have different RBI guidelines