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Commercial Banks and Basel Regulation Report

   

Added on  2020-05-28

8 Pages2160 Words43 Views

ContentsINTRODUCTION.......................................................................................................................................2TASK 2.......................................................................................................................................................3Banking System In Australia....................................................................................................................3Banking System In China..........................................................................................................................3Banking System In India...........................................................................................................................4TASK 3.......................................................................................................................................................5CONCLUSION...........................................................................................................................................6REFERENCE LIST AND APPENDICES..................................................................................................6INTRODUCTIONBasel committee on banking supervision has been established in the year of nineteen hundredand seventy four. The major objective of its formation is to improve the supervision function ofthe banking industry and to provide the better understanding of the key issues related to bankingsupervision. It entails the application of defined set of policies and the standards. The committeehas till now formed three standards namely Basel I, Basel II and Basel III. In this report, theemphasis will be on the Basel III. It has been introduced after the global financial crisis whichbegins of the period from the year of two thousand and seven to two thousand and nine. Basel IIIspecifies the minimum requirements which in general apply to all the banks. The major premiseof the Basel III is to regulate, supervise and manage the risk of the banks and accordingly hasprovided the structure containing three parts namely capital adequacy and liquidity risk. The report has been divided into two major parts. One is of the Task 2 which relates to theevaluation of the implications of Basel III on the banking system in Australia, China and India.Second is of Task 3 which explains how the particular bank of the particular country meets theBasel III requirements of having the capital adequacy ratio and the liquidity ratio. The report hasthen ended with the appropriate conclusion.

TASK 2In this task, the banking system in Australia, China and India will be evaluated with regard to theimplications of the Basel III. The different challenges posed by the inherent differences havebeen discussed.Banking System In AustraliaThe Australian Prudential Regulation Authority (APRA) has started the application of Basel IIIframework from the date of first of January Two thousand and thirteen. Capital of the banksrepresents the ability of the bank to cover the losses which may occur in the near future (APRA,2012). In the process of implementation of the Basel III requirements, the APRA detailed thatthe Australia Deposit taking institutions is not in the need of having the extended transitionarrangements. Rather Australia has the capital in excess of the minimum capital requirements inthe year of two thousand and thirteen and made it possible very easily to meet the minimumcapital requirements for the year ending two thousand and sixteen (BCBS, 2017). This has beenachieved by Australia only because of the approach that it has been following from the date of itsinception. It is very difficult to believe that in spite of having the global financial crisis Australiahas been able to finance the amount in the year of two thousand eight and nine and to earn morethan the required profits which have helped them to meet the minimum capital requirement. Because of the inherent differences, the banks in Australia will face the following challenges:-Management of the Capital framework – new buffer known as the counter cycle bufferhas been introduced which has increase the regulatory requirement for the banks thebreach of which can lead to heavy penalty which earlier was not there (RBA, 2013). -Investor satisfaction – There will be challenge for the industry to convince the investorsthat there will be low return on equity and that too will be compensated by the increase inthe safety of banks (Huang, 2011). Banking System In ChinaIn case of the banking system being adopted and followed by the China, it has been observed thatthe major banks in this country have already met the condition of the capital adequacyrequirements as provided in the Basel III. The capital adequacy ratio of all the major banks inChina has reached the core adequacy ratio of 7.5% and all are above the ratio of 10%. The bank

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