What Drives the Demand of Monetary Financial Institutions for Domestic Government Bonds?: Empirical Evidence on the Impact of Basel II and Basel III

The challenge of perfect regulation! Comments to the debate on reforms of the financial sector. In the light of the recent financial crisis the question was raised, if there is any chance of regulation at all to help prevent future crises. As lessons learned from the financial crisis regulators have already adopted numerous measures that aim to enhance financial regulation. Most prominent is the reform of the well-known Basel II soon to be Basel III framework. The following paper takes a closer look on the most important measures against the background of the economic aspects of financial intermediation. The overall focus of this paper is the question if the reform of Basel II can improve the regulatory environment. This includes an analysis of how the changes in financial regulation will affect financial institutions. As a result the paper will show that most of the discussed and adopted measures actually lead to greater regulatory effectiveness. Nevertheless, the key factor for more effective financial regulation is a deep knowledge with regard to financial institutions and their business models. Only a thourough understanding of each individual bank and the system as a whole puts the regulator in the position to assess risks which might lead to the next financial crisis and to react appropriately.

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Impact of BASEL III on India

Journal of Business Management and Information Systems ◽

10.48001/jbmis.2017.0401003 ◽

2017 ◽

Vol 4 (1) ◽

pp. 23-28

Author(s):

Aastha Jain

Keyword(s):

Financial System ◽

Basel Ii ◽

Basel Iii ◽

Banking Supervision ◽

Dynamic Changes ◽

Long Run ◽

The World ◽

Short Run ◽

Indian Banks ◽

The Impact

The Basel Committee on Banking Supervision (BCBS) set the first of capital accords in 1988, called the Basel I. Due to the dynamic changes in the world of financial system Basel I gave way to Basel II. Basel II plagued with the problem of pro-cyclicality paved the way for Basel III. India adopted Basel III norms in 2012. The present paper studies the impact of Basel III on India. In the short run, it will lead to a reduction in profitability of banks, curtailed credit to the economy and it is accused of being a needless burden on the Indian banks. But in the longer run, it will keep India integrated with the rest of the world. It will make the Indian financial system stronger, more stable and sound. It boils down to a trade-off between short-term costs and long run growth benefits.

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Understanding Implementation of Basel II and III in Albania: Obstacles and Solutions

European Journal of Interdisciplinary Studies ◽

10.26417/ejis.v6i1.p30-35 ◽

2016 ◽

Vol 6 (1) ◽

pp. 30

Author(s):

Sokol Ndoka ◽

Altin Zefi ◽

Ermela Kripa

Keyword(s):

Banking Sector ◽

Basel Ii ◽

Basel Iii ◽

Real Economy ◽

Credit Risks ◽

The Status ◽

Capital Ratios ◽

Stable Growth ◽

The Stability ◽

The Impact

Banking Sector in Albania is suffering from high NPL levels, compared with historic levels of NPL in Albania, or with regional nations who have comparable economics. The 2008 crises in USA taught us the impact that the real economy can have from a crisis in Banking Sector. Thus the implementation of Basel III framework and its Capital Requirement ratios becomes crucially important for the stability of the Financial sector and stable growth of the economy. This paper firstly examines the state of Basel II implementation in Albania by the banking sector. The banking sector is primarily invested in government bonds and treasuries and lending to businesses and individuals but the high levels of NPL from both bankrupted businesses and individual poses a credit risks and wider market risks. Albanian Government has committed to speed up implementation of Basel II and Basel III on capital ratios. But questions remain: What’s the status of the implementation? Can the economy absorb the costs of implementing or not implementing Basel III? Secondly we research the additional costs associated with implementation of the banking sector. Because of the expansionary policy of the Bank of Albania the lending rates have fallen but not as fast as expected. Credit growth has been mostly stagnant posing a risk to the growth of the economy. For this study we use time series on Financial Institutions in Albania from the Bank of Albania on capital ratios as well as the policies and requirements set. We find that Basel II criteria have not been met and more can be done to prepare the implementation of Basel III.

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Risk management debate focused on banking industry

International Journal of Entrepreneurial Knowledge ◽

10.37335/ijek.v1i1.9 ◽

2013 ◽

Vol 1 (1) ◽

Author(s):

Eugenia Ana Matis ◽

Cosmin Dumitru Matis ◽

Jiří Strouhal

Keyword(s):

Risk Management ◽

Corporate Governance ◽

Financial Institutions ◽

Historical Perspective ◽

Banking Sector ◽

Banking Industry ◽

Basel Ii ◽

Basel Iii ◽

Healthy Growth ◽

Broad Interest

Corporate governance is a subject of constant timeliness and broad interest, mainly aimed at ensuring adequate protection for investors and financial institutions. This interest in corporate governance is due to its influence on the healthy growth of companies and society as a whole. Paper provides evidence on implementation of Basel II and Basel III within Romanian banking sector from the historical perspective trying to show an overview on Basel developments and encourages further investigations into the particularities of the Basel III which is soon to be put into practice.

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Understanding operational risk capital approximations: First and second orders

Journal of Governance and Regulation ◽

10.22495/jgr_v2_i3_p6 ◽

2013 ◽

Vol 2 (3) ◽

pp. 58-78 ◽

Cited By ~ 4

Author(s):

Gareth Peters ◽

Rodrigo Targino ◽

Pavel Shevchenko

Keyword(s):

Operational Risk ◽

Basel Ii ◽

Second Order ◽

Capital Adequacy ◽

Model Parameters ◽

Basel Iii ◽

Clear Understanding ◽

Loss Process ◽

Heavy Tailed ◽

The Impact

We set the context for capital approximation within the framework of the Basel II / III regulatory capital accords. This is particularly topical as the Basel III accord is shortly due to take effect. In this regard, we provide a summary of the role of capital adequacy in the new accord, highlighting along the way the significant loss events that have been attributed to the Operational Risk class that was introduced in the Basel II and III accords. Then we provide a semi-tutorial discussion on the modelling aspects of capital estimation under a Loss Distributional Approach (LDA). Our emphasis is to focuss on the important loss processes with regard to those that contribute most to capital, the so called “high consequence, low frequency" loss processes. This leads us to provide a tutorial overview of heavy tailed loss process modelling in OpRisk under Basel III, with discussion on the implications of such tail assumptions for the severity model in an LDA structure. This provides practitioners with a clear understanding of the features that they may wish to consider when developing OpRisk severity models in practice. From this discussion on heavy tailed severity models, we then develop an understanding of the impact such models have on the right tail asymptotics of the compound loss process and we provide detailed presentation of what are known as first and second order tail approximations for the resulting heavy tailed loss process. From this we develop a tutorial on three key families of risk measures and their equivalent second order asymptotic approximations: Value-at-Risk (Basel III industry standard); Expected Shortfall (ES) and the Spectral Risk Measure. These then form the capital approximations. We then provide a few example case studies to illustrate the accuracy of these asymptotic captial approximations, the rate of the convergence of the assymptotic result as a function of the LDA frequency and severity model parameters, the sensitivity of the capital approximation to the model parameters and the sensitivity to model miss-specification.

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The impact of business cycle on capital buffer during the period of Basel-II and Basel-III: Evidence from the Pakistani banks

International Journal of Financial Engineering ◽

10.1142/s2424786318500366 ◽

2018 ◽

Vol 05 (04) ◽

pp. 1850036 ◽

Cited By ~ 1

Author(s):

Khurram Iftikhar ◽

Syed Faizan Iftikhar

Keyword(s):

Business Cycle ◽

Commercial Banks ◽

Basel Ii ◽

Basel Iii ◽

Estimation Technique ◽

Sample Period ◽

Method Of Moment ◽

Moment Estimation ◽

Generalized Method Of Moment ◽

The Impact

The main objective of this study is to examine the behavior of capital buffer (whether procyclicality or countercyclical) for Pakistani banks after implementation of the BASEL-II and BASEL-III accord. The sample in this study consists of 34 commercial banks of Pakistan during the period from 2006 to 2015. The impact of business cycle on Capital Buffer has been obtained by using the two-step system Generalized Method of Moment estimation technique. The empirical findings suggest that the behavior of the banks found to be procyclicality in whole sample period while it turns to be counter-cyclical after implementation of Basel-III accord.

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Understanding Implementation of Basel II and III in Albania: Obstacles and Solutions

European Journal of Interdisciplinary Studies ◽

10.26417/ejis.v2i4.p30-35 ◽

2016 ◽

Vol 2 (4) ◽

pp. 30

Author(s):

Sokol Ndoka ◽

Altin Zefi ◽

Ermela Kripa

Keyword(s):

Banking Sector ◽

Basel Ii ◽

Basel Iii ◽

Real Economy ◽

Credit Risks ◽

The Status ◽

Capital Ratios ◽

Stable Growth ◽

The Stability ◽

The Impact

Banking Sector in Albania is suffering from high NPL levels, compared with historic levels of NPL in Albania, or with regional nations who have comparable economics. The 2008 crises in USA taught us the impact that the real economy can have from a crisis in Banking Sector. Thus the implementation of Basel III framework and its Capital Requirement ratios becomes crucially important for the stability of the Financial sector and stable growth of the economy. This paper firstly examines the state of Basel II implementation in Albania by the banking sector. The banking sector is primarily invested in government bonds and treasuries and lending to businesses and individuals but the high levels of NPL from both bankrupted businesses and individual poses a credit risks and wider market risks. Albanian Government has committed to speed up implementation of Basel II and Basel III on capital ratios. But questions remain: What’s the status of the implementation? Can the economy absorb the costs of implementing or not implementing Basel III? Secondly we research the additional costs associated with implementation of the banking sector. Because of the expansionary policy of the Bank of Albania the lending rates have fallen but not as fast as expected. Credit growth has been mostly stagnant posing a risk to the growth of the economy. For this study we use time series on Financial Institutions in Albania from the Bank of Albania on capital ratios as well as the policies and requirements set. We find that Basel II criteria have not been met and more can be done to prepare the implementation of Basel III.

Download Full-text