BASEL III: responses to consultative documents, vital aspects of the consultative processes and the journey culminating in the present framework (Part 1)
AbstractThis paper is aimed at providing a comprehensive overview of, and responses to, four very vital components of the consultative processes which have contributed to the new framework known as Basel III. The paper will approach these components in the order of the consultative processes, namely, the capital proposals, the liquidity proposals and the Proposal to ensure the loss absorbency of regulatory capital at the point of non-viability. The capital proposals comprise proposals aimed at strengthening the resilience of the banking sector, the proposal relating to international framework for liquidity risk measurement, standards and monitoring and, the countercyclical capital buffer proposal. Whilst the capital proposals have been welcomed, there has been growing realisation since the aftermath of the recent Financial Crises that banks which have been complying with capital adequacy requirements could still face severe liquidity problems. As well as highlighting the importance of introducing counter cyclical capital buffers, the response to the countercyclical proposal draws attention to the need for greater focus on more forward looking provisions, as well as provisions which are aimed at addressing losses and unforeseen problems attributed to “maturity transformation of short-term deposits into long term loans.” The Basel Committee’s consultative document on the “Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non Viability” sets out a proposal aimed at “enhancing the entry criteria of regulatory capital to ensure that all regulatory capital instruments issued by banks are capable of absorbing losses in the event that a bank is unable to support itself in the private market.” Amongst other issues addressed, the response to the consultative document highlights why the controlled winding down procedure also constitutes a means whereby losses could still be absorbed in the event that a bank is unable to support itself in the private market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32869.
Date of creation: Oct 2010
Date of revision: Aug 2011
Counter cyclical buffers; liquidity risks; pro cyclicality; loan loss provisions; financial crises; bank; regulation; capital; insolvency; financial crises; moral hazard; Basel III;
Other versions of this item:
- Ojo, Marianne, 2011. "Basel III – responses to consultative documents, vital aspects of the consultative processes and the journey culminating in the present framework (Part 1)," MPRA Paper 33082, University Library of Munich, Germany.
- K2 - Law and Economics - - Regulation and Business Law
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-08-22 (Accounting & Auditing)
- NEP-ALL-2011-08-22 (All new papers)
- NEP-REG-2011-08-22 (Regulation)
- NEP-RMG-2011-08-22 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberto Alesina & Francesco Giavazzi, 2010. "Europe and the Euro," NBER Books, National Bureau of Economic Research, Inc, number ales08-1, January.
- Agenor, Pierre-Richard & Pereira da Silva, Luiz A., 2009.
"Cyclical effects of bank capital requirements with imperfect credit markets,"
Policy Research Working Paper Series
5067, The World Bank.
- AgÃ©nor, Pierre-Richard & Pereira da Silva, Luiz A., 2012. "Cyclical effects of bank capital requirements with imperfect credit markets," Journal of Financial Stability, Elsevier, Elsevier, vol. 8(1), pages 43-56.
- Pierre-Richard AgÃ©nor & Luiz A. Pereira da Silva, 2011. "Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets," Working Papers Series, Central Bank of Brazil, Research Department 234, Central Bank of Brazil, Research Department.
- Jain, Satish (ed.), 2010. "Law and Economics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198067733, October.
- Gabriel JimÃ©nez & JesÃºs Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.