Lending and research processes are becoming more complex and innovative day by day, which as a consequence has different exposures through the organization to the activity. In addition, the challenge of calculating the liquidity of capital and the different requirements of the level of solvency according to international and local regulations.
Basel III, which is alternatively referred to as the Third Basel Accord or Basel Standards, is part of the continuing effort to enhance the international banking regulatory framework.
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. It specifically builds on the Basel I and Basel II documents in a campaign to improve the banking sector’s ability to deal with financial stress, improve risk management, and promote transparency. On a more granular level, Basel III seeks to strengthen the resilience of individual banks in order to reduce the risk of system-wide shocks and prevent future economic meltdowns.
Basel III was rolled out by the Basel Committee on Banking Supervision—then a consortium of central banks from 28 countries, shortly after the credit crisis of 2008. Although the voluntary implementation deadline for the new rules was originally 2015, the date has been repeatedly pushed back and currently stands at January 1, 2022.
Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.
Managing capital adequacy is a challenge that financial markets often face. Basel III standard provided guidance to financial institutions to mitigate risk. It sets the requirements on minimum capital ratios, stress testing and liquidity. Although it is developed for banks, it can be applied to any actor on the financial market, including brokers. We presented how to calculate main Basel III ratios and make risk mitigation decisions based on the results. Download the presentation below and find out more about Credit Risk and Stress test.
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