Question

Please, summary about BASEL1, BASEL2, BASEL2.5 and BASEL3.

I don't know well these accord each. So please give me some kind explanation about each BASEL.

Answer 1

Basel

Many banks fail because of not able to meet their risk exposures. To meet the risk exposures banks mutually make a committee called Basel. Its name is based on city of Switzerland. Norms created by this committee is called Basel Norms or standard or accords.

These norms are basically supervisory standards. These norms mainly focus on risk on banks and their financial systems.

Summary of Basesl
S.No.	Details	Basels
		1	2	2.5	3
1	Year	1988	2004	Implemented on 2011	2010
2	Focus on	Credit risk and Capital Measurement system	Three parameter or Pillars:- Capital Adequacy Requirements, Supervisory Review, Market Discipline	Revision of Basel II	Three parameters-Capital Adequacy, Stress Testing and Market Liquidity risk.
3	Standard summary	Capital should be 8% of Risk Weighted Assets (RWA). Risk Weighted Assets (RWA) means different assets carry different risk like cash, Govt. Securities carries no or lesser risk whereas personnel loan carries higher risk.	Banks should maintain 1) minimum Capital adequacy ratio of 8% of risk assets. 2) Use of better techniques for mitigating risks of operation, market and credit. 3) Better reporting to central bank for capital adequacy and Risk exposures.	Banks should consider 1) Capital migration risk 2) Relations with other risk 3) Capital Requirements should be reviewed 4) Standardized charges and process for Securitisation and re-securitisation.	Improve ability of banking system to absorb financial or economic stress. Improvement in risk management and governance. Strengthening of transparency and disclosures.