The purpose of this seminar is to give you an overview of the updated Basel rules for capital adequacy and liquidity coverage in banks.
We start with a general introduction to the Basel framework and give an overview of the changes that have been agreed to strengthen resilience of the banking system in the wake of the global financial crisis.
We discuss how the quality, consistency, and transparency of the capital base will be raised and the risk coverage of the capital framework will be strengthened by reducing procyclicality, improving risk management, and by introducing a countercyclical capital buffer and a gross leverage back-stop.
We then give an overview of how various types of risk are measured under the Basel III and how these risk measures translate into capital charges. We illustrate with some simple examples.
Further, we explain the requirements under "pillars 2 +3" for stress testing, internal capital assessment and allocation, and risk disclosure, and we discuss the role of supervisors under the supervisory review process.
Finally, we discuss the practical challenges of implementing the (new) rules. We also look at the possible consequences of Basel III for the individual bank and for the banking system.
