2. Term Paper
On
B-406:Central Banking & Regulations
Submitted To:
Mr. Shahidul Islam Zahid
Lecturer
Department of Banking
University of Dhaka
Submitted By
Group-12
Date of Submission
17th Nov, 2011
3. Date: 17th November, 2011.
To
The course teacher
Mr. Shahidul Islam Zahid
Lecturer
Department of Banking
University of Dhaka
Subject: An application for acceptance of term paper.
Dear Sir,
It is our pleasure to submit to you the term paper on ‘Implementation of BASEL- that you have
assigned us to prepare. We have tried my best in preparing this term paper and hope it will
satisfy your desire and my course requirement.
We will be always available if any clarification is needed. We request you to excuse us for any
mistake that may occur in the term paper despite our best effort. We believe you will view my
mistakes with your generous consideration.
Yours sincerely
Name ID No: Signature
Nadia Rahman 16
Md. Nazmul Alam 02
17
Md .khairuzzman
50
Md. Farhadur Rahaman
Imtiaz Ahmed Nayeem 09
Sohana Ferdaus 18
4. Acknowledgement
Preparing the term paper on BASEL III implementation in banking sector has been a great
experience for us in light of the course 406:Central Banking: Regulations and Supervision We
strongly believe works like this will surely help us to have a clear concept about Basel Accord
and Basel III. We express our sincere gratitude to our honorable course teacher Md. Shahidul
Islam, Lecturer, Department of Banking, University of Dhaka for his guidance, advice and
giving outline for preparing this report.
Besides, we thank our group members for their hard working, encouragement and
collaboration in the success worthy completion of this report.
5. E x ecu tiv e S u mmary
BASEL III is a new global regulatory standard on bank capital adequacy and liquidity agreed by
the members of the Basel Committee on Banking Supervision. The third of the Basel Accords
was developed in a response to the deficiencies in financial regulation revealed by the global
financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory
requirements on bank liquidity and bank leverage.
Basel III is an evolution rather than a revolution for many banks. It was developed from the
existing Basel II framework, and the most significant differences for banks are the introduction
of liquidity and leverage ratios, and enhanced minimum capital requirements. An effective
implementation of Basel III will demonstrate to regulators, customers, and shareholders that the
bank is recovering well from the global banking crisis of 2008. A speedy implementation will
also contribute to a bank’s competitiveness by delivering better management insight into the
business, allowing it to take advantage of future opportunities. Although implementing Basel III
will only be an evolutionary step for many organizations, the impact of Basel III on banks and
the banking sector should not be underestimated, because it will drive significant challenges that
need to be understood and addressed. For every bank, working out the most cost-effective model
for implementing Basel III will be a critical issue.
Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of
Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introduces
additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a
discretionary countercyclical buffer, which allows national regulators to require up to another
2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum
3% leverage ratio and two required liquidity ratios.
The Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets to
cover its total net cash flows over 30 days; the Net Stable Funding Ratio requires the available
amount of stable funding to exceed the required amount of stable funding over a one-year period
of extended stress.
6. Table of contents
serial particulars Page
1.0 1-2
Introduction
1
1.1 Methodology
2
1.2 objective of the report
3
1.3 Limitations
2.0 Overview
3.0 BASEL III at a glance 3-6
4.0 Implementation of BASEL III 6
5.0 Features of Basel III 6-8
6.0 Detail analysis of Basel III 8-9
7.0 Transition arrangements 9-11
8.0 Impact of Macroeconomic in Basel III 12
9.0 Challenges that facing to implement the Basel 12-15
III
10.0 10. Enforcement of Basel III on 15-17
financial institutions
11.0 Conclusion 17
