Wednesday, September 22, 2010

>BANKING SECTOR: Basel III – been there; done that

■ Basel Committee on Banking Supervision (BCBS) announces Basel III capital requirements.

■ The new framework requires 50-200% higher tier I capital than that required under basel II

■ Indian banks would not require much capital for transition to Basel III norms as they comply with most of the norms even as of now
■ However, a faster credit growth would mean that Indian banks may be required to keep significantly higher tier I capital if the RBI wishes so

Basel III norms require 50-200% higher capital than Basel II
The Group of Governors and Heads of Supervision, the oversight body of BCBS announced Basel III capital norms on September 12, 2010. Under Basel III, the tier I capital requirement would go up by 50-200% over period of next nine years for banks globally. The full-fledged implementation of the norms will start from 2015 and will go on till 2019.

The tier I capital would be sum-total of common tier I capital, capital conservation buffer and counter cyclical buffer (optional).

To read the full report: BANKING SECTOR