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Risk Management Challenge for Basel Ⅱ & Ⅲ

Explore the significant differences between Basel III and Basel II standards, including new capital, leverage, and liquidity requirements to enhance banking sector regulation and risk management.

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Risk Management Challenge for Basel Ⅱ & Ⅲ

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  1. Risk Management Challenge for Basel Ⅱ& Ⅲ Chau-Jung Kuo Professor, Department of Finance, NSYSU 2011.7.8. The 19th Annual Conference on PBFEAM

  2. The Significant Differences Between Basel Ⅲ and Basel Ⅱ • Basel Ⅲ proposes many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. • The capital standards and new capital buffers will require banks to hold more capital and higher quality of capital than under current Basel Ⅱ rules. • The new leverage and liquidity ratios introduce a non-risk based measure to supplement the risk-based minimum capital requirements and measures to ensure that adequate funding is maintained in case of crisis. 1

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  4. Some Key Elements for The New Regulations Source: Bank for International Settlements, Basel Committee on Banking Supervision. 3

  5. Some Key Elements for The New Regulations (Cont’) Source: Bank for International Settlements, Basel Committee on Banking Supervision. 4

  6. Some Key Elements for The New Regulations (Cont’) Source: Bank for International Settlements, Basel Committee on Banking Supervision. 5

  7. Capital Impact of New Definition of Capital Average Capital Ratios Impact from the New Regulations * “Gross CET 1” is the ratio of gross CET 1 (without deductions) relative to current risk-weighted assets. “Net” columns show net CET 1 (with deductions) relative to new risk-weighted assets. Source: BIS, “Results of the Comprehensive Quantitative Impact Study”, Basel Committee on Banking Supervision, Dec. 2010. 6

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