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    Pillars of Banking Three Pillars of Basel III: October 4, 2014

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    Ashwin Mandale
    The document discusses the three pillars of Basel III - minimum capital requirements, supervisory review processes, and market discipline. The first pillar sets requirements for total risk including credit, market, and operational risk. The second pillar ensures banks have adequate capital to support all business risks through internal capital adequacy assessments and supervisory reviews. The third pillar complements the first two by requiring banks to disclose their capital structure and approaches to assessing capital adequacy.

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    Pillars of Banking Three Pillars of Basel III: October 4, 2014

    Uploaded by

    Ashwin Mandale
    36 views2 pages
    The document discusses the three pillars of Basel III - minimum capital requirements, supervisory review processes, and market discipline. The first pillar sets requirements for total risk including credit, market, and operational risk. The second pillar ensures banks have adequate capital to support all business risks through internal capital adequacy assessments and supervisory reviews. The third pillar complements the first two by requiring banks to disclose their capital structure and approaches to assessing capital adequacy.

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    Pillars of Banking

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    The document discusses the three pillars of Basel III - minimum capital requirements, supervisory review processes, and market discipline. The first pillar sets requirements for total risk including credit, market, and operational risk. The second pillar ensures banks have adequate capital to support all business risks through internal capital adequacy assessments and supervisory reviews. The third pillar complements the first two by requiring banks to disclose their capital structure and approaches to assessing capital adequacy.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views2 pages

    Pillars of Banking Three Pillars of Basel III: October 4, 2014

    Uploaded by

    Ashwin Mandale
    The document discusses the three pillars of Basel III - minimum capital requirements, supervisory review processes, and market discipline. The first pillar sets requirements for total risk including credit, market, and operational risk. The second pillar ensures banks have adequate capital to support all business risks through internal capital adequacy assessments and supervisory reviews. The third pillar complements the first two by requiring banks to disclose their capital structure and approaches to assessing capital adequacy.

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    © All Rights Reserved
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    [PILLARS OF BANKING] October 4, 2014

    Three Pillars of Basel III


    The Basel III Guidelines are based upon 3 very important aspects which are called 3
    pillars of the Basel II. These 3 pillars are as follows:
    Minimum Capital Requirement
    Supervisory review Process
    Market Discipline
    First Pillar:
    Minimum Capital Requirement The first pillar Minimum Capital Requirement has been
    discussed above. This mainly for total risk including the credit risk, market risk as well
    as Operational Risk .
    Second Pillar:
    Supervisory Review Process The second pillar i.e. Supervisory Review Process is
    basically intended to ensure that the banks have adequate capital to support all the risks
    associated in their businesses. In India , the RBI has issued the guidelines to the banks
    that they should have an internal supervisory process which is called ICAAP or Internal
    Capital Adequacy Assessment Process. With this tool the banks can assess the capital
    adequacy in relation to their risk profiles as well as adopt strategies for maintaining the
    capital levels. Apart from that, there is another process stipulated by RBI which is
    actually the Independent assessment of the ICAAP of the Banks. This is called SREP or
    Supervisory Review and Evaluation Process. The independent review and evaluation
    may suggest prudent measures and supervisory actions whatever is needed. ICAAP is
    conducted by Banks themselves and SREP is conducted RBI which is along with the
    RBI's Annual Financial Inspection (AFI) of the bank.

    [PILLARS OF BANKING] October 4, 2014

    Third Pillar:
    Market Discipline The idea of the third pillar is to complement the first and second
    pillar. This is basically a discipline followed by the bank such as disclosing its capital
    structure, tier-I and Tier II Capital and approaches to assess the capital adequacy. In
    the above discussion, we could understand that the Basel II and forthcoming Basel III
    are basically guidelines which focus upon adequate capital in the banks and minimize
    the risk to the customers or depositors. The idea is to make a sound financial system
    which not only helps the banks and but the entire economy of the country to maintain
    the trust and faith, as transparency in the business. The centerpieces are "Capital
    Adequacy" and "Risks".

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