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Basel III came out with a comprehensive set of reform measures by correcting flaws perceived in Basel II, emphasizing the improvement of quantity and quality of capital base of the banks coupled with stricter liquidity rules with stronger supervision, better governance & risk management as well as strengthens bank's transparency & disclosure standards. Basel III reform package also addresses the lessons of the financial crisis. Bangladesh has adopted new rules phased in under Basel III in 2015 to strengthen the regulations of the banking sector for creating a sounder and safer financial system of the country. This paper analyzes secondary data collected from annual reports of 44 local commercial banks of Bangladesh for the period of January-December 2015. It analyzes the dynamics of Basel III indicators from the market disclosure of 2015 of the sample banks. This paper, in principle, aims to study the * This paper is an outcome of independent research work of the authors, written for BIBM Annual Banking Conference 2016. Views/analysis/recommendations shared are those of authors and do not necessarily reflect the official position of the organizations the authors are affiliated with. Page 2 of 35 first-year progress of Basel III implementation in Bangladesh. It examines the status of Capital to Risk Weighted Assets Ratio (CRAR), Common Equity Tier-1 (CET 1) ratio, Liquidity Coverage Ratio (LCR), and Leverage Ratio of local commercial banks of Bangladesh in complying with capital and liquidity standards of Basel III. It further evaluates whether there exist any correlation between CRAR and Non-Performing Loan (NPL) in the industry. Moreover, this study attempts to figure out the challenges perceived by the industry in attaining sustainable capital standards. Finally, it comes up with plausible way-outs assessed from first-year status of Basel III of commercial banks of Bangladesh and advocates how the role of prudent credit risk management can better help face the challenges of NPL in maintaining the capital standard of commercial banks of Bangladesh.
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This chapter reviews capital allocation in the banking sector. Capital is crucial if banks are to be protected from banking risks. In order to ensure financial stability in the banking sector, banking regulators demand that banks hold sufficient capital to support their risks. The Basel Capital Accords, which aim to enhance the risk management functions of banks and to strengthen the stability of the international banking system, have introduced a common regulation framework for the capital allocation. They are international guidelines to encourage convergence toward common standards in the banking sector. The Basel Capital Accords have evolved over time because of the growth of international risks.
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In everyday life, risk is about undesired unpleasant, and at times disastrous prospective events associated with human action or inaction. Banking is becoming complex, compounded by exploding technological capabilities expanding product offerings and deregulation of competition. In other words, banking is a business of risk. For this reason, efficient risk management is extremely required. The Indian banking system is better prepared to adopt Basel II than it was for Basel I. The Basel II Accord had led the banks to new prudential norms like capital adequacy and identification of bad debts. Recently many banks have appointed senior managers to oversee a formal risk management function. The effective risk management lies with the ability to gauge the risks and to take appropriate measures. In the light of this, an analysis was carried out to highlight the NPAs position of SBI and associates and also capital adequacy ratio after the implementation of Basel II Accord to focus on the risk management practices in State Bank of India (SBI) and associates for the period of six years from 2007-08 to 2012-13. Hence an efficient risk management system is the need of time.
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In the last two decades there has been a remarkable change in the functioning of the banks. Technological changes, Liberalization since 1990 have introduced contemporary and complex financial instruments. Due to this the sales has raised in the financial markets and has resulted in the different types of risks in the banking sector. In the recent years many financial crisis have raised a particular challenge for the central banks in different countries. Basel Committee of Banking Supervision has taken various steps to face these challenges by introducing Basel I and Basel by making the global banking sector more resilient. But the late 2000 financial crisis in US highlighted the loopholes in the Basel II framework in making the banking sector more stable and sound. Therefore the Basel III norms were introduced by the Bank for International Settlements. The Basel guidelines has been drafted by the Bank for International Settlements in agreement with the regulatory authorities of the global banking sector in fifteen developing countries with the main aim of prescribing codes of banking supervision and enhancing financial stability. This research paper analyzes whether Basel III norms are required for the strong and stable resilient banking sector in India. For this purpose some of the important facts have been examined like the significant elements of the Basel III norms, time-line for the implementation of these norms in India, Basel III banking norms in the Indian Banking System with the Implications of these norms on the Indian Banking System.
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Introduction: In 1990s, policy of liberalization was embarked and licenses to a small number of private sector banks were given, which came to be known as New Generation tech-savvy banks. After which the banking sector has seen a rapid growth with strong contribution from all three sectors of banks, namely, public banks, private banks and foreign banks. Following the failure of some large banks, there has been a debate internationally on the segregation of supervision from traditional central banking, citing the difference between monetary policy objectives and bank supervision objectives. Banks have attained a unique and central role in financial markets through their deposit taking, lending, insurance, securities brokerage and underwriting, mutual funds and many other services. The objective of studying regulation of banks is to ensure that the regulations protect the public and also fosters efficient and competitive banking system. Moreover, all of us conduct transactions with the banks quite frequently and knowledge of the bank regulations will help us in understanding how banking system works and judging the extent of regulatory protection being provided.
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