‘Basel III Accord’ or Simply ‘Basel III’, Often seen in the News, Seeks to
- develop national strategies for the conservation and sustainable use of biological diversity
- improve banking sector’s ability to deal with financial and economic stress and improve risk management
- reduce the greenhouse gas emissions but places a heavier burden on developed countries
- transfer technology from developed Countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals.
Improve banking sector’s ability to deal with financial and economic stress and improve risk management.
First I want to clear the Basel III – Actually in Basel III, Basel is a Committee on Banking Supervision reforms and the means of III are pillar, Pillar 1, Pillar 2 and Pillar 3 which deal with risk management aspects for the banking sector. This is such type a framework on bank capital adequacy, stress testing and market liquidity risk.
Basel III is released on December 2010. The base I and Base II are the earlier versions of the same and were less stringent. The Basel III 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.
The reforms target
-> Bank-level or micro-prudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
-> Macro-prudential, system-wide risks that can build up across the banking sector as well as the procyclical amplification of these risk over time.
These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk of system wide shocks.