Why This Video is a Must-Watch for Bankers?
- Are you preparing for CCP Certification?
- Confused about Basel Norms & Capital Adequacy?
- Want a clear, easy-to-understand explanation of complex banking regulations?
If yes, you’ve landed on the right page! ✅
This session covers everything you need to know about Basel Norms, their significance, and how they impact the banking sector. We’ll break down Basel I, II, and III, explain Capital Adequacy Ratios (CAR), and discuss how risk management plays a crucial role in banking.
👉 Watch the full video before diving into the details below:
Understanding Basel Norms & CCP Certification: A Step-by-Step Guide
📌 What is Basel Committee on Banking Supervision?
The Basel Committee on Banking Supervision (BCBS) is an international body that sets regulatory standards for banks worldwide.
- Formed after a major banking crisis in 1974
- Sets global banking regulations to maintain financial stability
- Provides a platform for countries to improve their banking regulations
BCBS ensures that banks have sufficient capital buffers to withstand financial stress, thereby maintaining trust in the banking system.
📌 Basel I: The Beginning of Global Banking Regulations
Introduced in 1988, Basel I was the first set of global banking regulations.
- Minimum Capital Requirement: Banks must hold at least 8% capital of their risk-weighted assets (RWA).
- Focused only on Credit Risk.
- India adopted Basel I in 1992 and implemented it over three years.
Basel I provided a foundation but was limited in its approach as it didn’t consider market and operational risks.
📌 Basel II: Strengthening Risk Management
Basel II, introduced in 2004, improved risk assessment by focusing on three key pillars:
- Minimum Capital Requirements – Banks must calculate credit risk, market risk, and operational risk.
- Supervisory Review – Regulatory authorities like RBI monitor banks effectively.
- Market Discipline – Banks must disclose risk exposure & management strategies to increase transparency.
Basel II aimed to bring better risk sensitivity but required banks to rely on external credit rating agencies, leading to certain shortcomings.
[FREE EPDF] Certified Credit Professional | Credit Rating | Chapter 6
📌 Basel III: Lessons from the 2008 Financial Crisis
Following the 2008 financial crisis, Basel III was introduced in 2010 to strengthen banking regulations.
- Higher Capital Requirements – CET1 increased from 2% to 4.5%.
- Leverage Ratio – Restricts excessive borrowing.
- Liquidity Coverage Ratio (LCR) – Ensures banks have enough liquid assets.
- Net Stable Funding Ratio (NSFR) – Encourages long-term stable funding.
Basel III brought stricter capital adequacy measures, ensuring banks could better withstand economic shocks.
📥 Download the CCP Certification Study Guide (PDF)
Want to revise key concepts quickly? Download the complete PDF guide covering Basel norms, risk management, and capital adequacy!
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