Banking & Financial Awareness
Basel III
Banking regulation framework
Overview
Basel III is a framework published by the Basel Committee on Banking Supervision (BCBS) in response to the deficiencies in financial regulation revealed by the 2008 financial crisis. It sets international standards and recommendations for bank capital requirements, stress tests, liquidity regulations, and leverage, with the goal of mitigating the risk of bank runs and bank failures. Basel III builds upon the standards of Basel II, introduced in 2004, and Basel I, introduced in 1988.
Source: Wikipedia — Basel III (CC BY-SA)
Key concepts
How Basel III connects to the ideas, people and events around it.
The Basel Committee on Banking Supervision is a body that brings together bank supervisory authorities to set common prudential standards and policy. It relies on a permanent secretariat hosted by the Bank for International Settlements in Basel, Switzerland.
Financial regulation is a broad set of policies that apply to the financial sector in most jurisdictions, justified by two main features of finance: systemic risk, which implies that the failure of financial firms involves public interest considerations; and information asymmetry, which justifies curbs on freedom of contract in selected areas of financial services, particularly those that involve
The 2008 financial crisis was a major worldwide financial crisis which started in the U.S. The cause of the crisis was the collapse of the 2000s U.S. housing bubble.
Capital requirements refer to the set of rules and guidance that banks must observe in most current bank prudential frameworks as exist in individual jurisdictions. They form a central component of bank regulation and supervision.
In finance, a stress test is an analysis or simulation designed to determine the ability of a given financial instrument or financial institution to deal with an economic crisis.
Liquidity regulations are financial regulations designed to ensure that financial institutions have the necessary assets on hand in order to prevent liquidity disruptions due to changing market conditions.
In finance, leverage, also known as gearing, is any technique involving borrowing funds to buy an investment.
A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may fail in the near future.
Revise Basel III
Flashcards and a quick quiz, built from this map.
Questions about Basel III
What is Basel III?
Basel III is a framework published by the Basel Committee on Banking Supervision (BCBS) in response to the deficiencies in financial regulation revealed by the 2008 financial crisis. It sets international standards and recommendations for bank capital requirements, stress tests, liquidity regulations, and leverage, with the goal of mitigating the risk of bank runs and bank failures.
What are the key concepts related to Basel III?
The main concepts connected to Basel III include Basel Committee on Banking Supervision, Financial regulation, 2008 financial crisis, Capital requirement, Stress test (financial), Liquidity regulation, Leverage (finance), Bank run. Each is linked on the map above with its own summary.
Which exams cover Basel III?
Basel III is part of Banking & Financial Awareness, which appears in the syllabus of IBPS PO, IBPS Clerk, IBPS RRB, IBPS SO, SBI PO, SBI Clerk and 4 more exams.