IMP. Points on Basel III Norms

Basel Committee on Banking Supervision:

i. The Basel Committee on Banking Supervision is an institution of Governors of the Central Banks of “G-10” nations and was formed in 1974.

ii. The Committee is a forum for discussion on the handling of specific supervisory problems.

iii. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide.

iv. The committee operates from Basel in Switzerland. 

Basel III Guidelines:are based upon 3 very important aspects which are called 3 pillars of the BASEL II.

These III pillars are:

1. Minimum Capital Requirement

2. Supervisory Review Process

3. Market Discipline

Important Points:

1. In accordance with Basel III norms, Indian banks will have to maintain their capital adequacy ratio at 9 per cent as against the minimum recommended requirement of 8 per cent.  

2. Under Basel III accord, banks have to maintain Tier-one capital (equity and reserves) at 7 per cent of risk weighted assets (RWA) and a capital conservation bugger of 2.5 per cent of RWA. 

3. According to the recent RBI financial stability report, Indian banks will require an additional capital of Rs.5 trillion (5lakh crore) to comply with Basel III norms, including Rs 3.25 trillion (Rs 3.25 lakh crore) as non-equity capital and Rs 1.75 trillion(Rs 1.75 lakh crore) in the form of equity capital over the next five years. 

4. To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy, the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14). The Basel III capital ratios will be fully phased in as on March 31, 2018.

Questions Related to BASEL III For RBI Assistant Exam:

1. According to Basel III norms Indian banks will have to maintain their capital adequacy ratio at how much percent?

(1) 8%                         (2) 9%

(3) 7%                         (4) 6%

(5) None of these

Ans: (2) 9%

2. Under Basel III accord, Indian’s banks have to maintain Tier-one capital (equity and reserves) at how much____per cent of risk weighted assets (RWA).

(1) 8%                         (2) 7%

(3) 9%                         (4) 5%

(5) None of these

Ans: (2) 7%

3. According to the recent RBI financial stability report, how much additional capital does an Indian bank will require to comply with Basel III norms?

(1) Rs 3 Lakh Crore               

(2) Rs 1.75 Lakh Crore

(3) Rs.5 Lakh Crore               

(4) Rs.4.5 Lakh Crore

(5) None of these

Ans : (3) Rs.5 Lakh Crore

4. Where is headquarter ofBasel Committee on Banking Supervision (BCBS)?

(1) Rome                                 (2) Switzerland

(3) Belgium                             (4) Washington DC

(5) None of these

Ans. (2) Switzerland

5. To meet the Basel III regulations regarding capital adequacy, what is the total capital infusion for Public Sector banks in budget 2013-14?

(1) Rs 15,000 crore                       (2) Rs 30,000 crore

(3) Rs 12,000 crore                       (4) Rs 14,000 crore

(5) None of these

Ans: (4) Rs 14,000 crore