BASEL-3 NORMS

a) The Basel Committee is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to

strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.

Stefan Ingves, Governor of Sveriges Riksbank (SWEDEN), is the Chairman of the Basel Committee.

b) Basel III or Basel 3 released in December, 2010 is the third in the series of Basel Accords. These accords deal with risk management aspects for the banking sector.

c) According to Basel Committee on Banking Supervision "Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector".

d) Basel 3 measures aim to:

 Improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source   Improve risk management and governance Strengthen banks' transparency and disclosures.

Three Pillars of Basel 3 

 Pillar 1: Minimum Regulatory Capital Requirements based on Risk Weighted Assets (RWAs):

Maintaining capital calculated through credit, market and operational risk areas (mainly that capital which can absorb risk.)

Pillar 2: Supervisory Review Process: 

Regulating tools and frameworks for dealing with peripheral risks that bank face.

 Pillar 3: Market Discipline: 

Increasing the disclosures that banks must provide to increase the transparency of banks 

Important Facts related to BASEL 3 

• Minimum Ratio of Total Capital To RWAs--10.50% 
•  Minimum Ratio of Common Equity to RWAs--4.50% to
• 7.00% 
•  Tier I capital to RWAs--6.00% 
•  Core Tier I capital to RWAs--5.00% 
•  Capital Conservation Buffers to RWAs--2.50% 
•  Leverage Ratio--3.00% 
• Countercyclical Buffer--0% to 2.50%