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Basel Framework and Standards

Regulatory capital requirements have evolved in an attempt to guard against unexpected losses arising from various risks generated by financial institutions.

25 Modules

Overview

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Regulatory capital requirements have evolved in an attempt to guard against unexpected losses arising from various risks generated by financial institutions. From simple beginnings in the 1980s, the regulations have become ever more sophisticated in order to capture the increasing subtleties of credit, market, and operational risk. Yet it would seem that such developments were inadequate for dealing with an event on the scale of the global financial crisis.

The financial crisis highlighted that both the quantity and quality of bank capital was insufficient to meet the losses that occurred. The size and nature of losses, and the need to enlist government support to prevent bank failures, quickly galvanized the Basel Committee on Banking Supervision (BCBS) and the regulatory community to rethink the capital adequacy rules. In addition, the crisis underlined the need for regulators to address not simply capital adequacy but also liquidity and leverage. This is what is being done through the development and implementation of Basel III.

This course provides detailed coverage of how the Basel requirements, in relation to capital adequacy, have progressed from the simplicity of the original Basel Capital Accord (Basel I) in the 1980s to the more sophisticated requirements of Basel II, Basel 2.5 and, most recently, Basel III.

The course also explains in detail how Basel III changes the nature of previous capital adequacy regimes. It also examines other areas addressed by Basel III, such as risk coverage, liquidity standards, and leverage rules.

Understand the requirements of The Basel Regulatory Framework and its background Specify the data requirements for the key calculations involved in various approaches.
Perform the basic calculations for both the Standardized and IRB approaches.
Understand the advanced approaches for credit risk as well as operational risk.
Identify the specific issues to be addressed under the supervisory review process.
Understand the general considerations with regard to disclosure requirements.