Question

1. Review and summarize the latest Dodd-Frank Act Stress Test results.
2. Review and summarize the latest BASEL III disclosures.

Answer 1

DODD FRANK ACT STRESS TESTING

1. Meaning of DODD FRANK ACT STRESS TESTING

its short form is DFAST

its a type of testing , which is a forward looking exercise , designed to determine the ability of a given financial instrument or financial institution to dealwith an economic crisis.

these are the regulatory framework introduced to enhance the capacity to recover quickly from the difficulties of banks and financial institutions .

its a forward looking quantitative evaluation of bank capital that demonsrates how the stressful economic conditions developed by the federal reserve would affect the capital ratios of the large firms.

2.summary of DFAST 2019 (latest one)

• the result of the year (2019) , suggest that , in the aggregate 18 firms subject to the test , would experience substantial losses under adverse and severaly adverse scenarios . eventhough they will continue lending to businesses and households .
• aggregate losses atthe 18 firms under severaly adverse scenarios are to be 410 billion dollar.
• aggregate projected pre provision net revenue in DFAST 2019 is to be 327 billiondollar, compared with 389 billion dollar in DFAST 2018.
• the projected decline in pre tax net income is 0.8 percent average total assets

BASEL 3 DISCLOSURE

• Latest one is , BASEL 3 - PILLAR 3 DISCLOSURES AS AT SEPTEMBER 30 , 2019
• basel 3 capital regulations are applicable to banks in India from 1st April 2013 .
• its detailed regulations are issued by RBI , under Basel 3 capital regulations july 2015 and are amended timely
• it includes 3 mutually inforcing pillars . they are ,

pillar 1 is minimum capital requirements for credit risk , market risk and operational risk

pillar 2 is supervisory review of capital adequacy

pillar 3 is market discipline.

• this basel regulation is applicable to IDFC FIRST Bank and its one wholly owned subsidiary IDFC FIRST Bharat limited which together constitute the group.