Basel III norms target at which of the following?begin{enumerate}item Improve the banking sectors ability to absorb shocks arising from financial and economic stress.item Improve risk management and governance.item Strengthen banks transparency.end{enumerate} Choose the correct answer using the codes given below:

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

‘Basel III’ norms target at which of the following?

A	1 only
B	1 and 2 only
C	1 and 3 only
D	1, 2 and 3

Explanation:

Detailed explanation-1: -It consists of three main pillars: minimum capital requirements (Pillar 1), supervisory review (Pillar 2) and market discipline (Pillar 3). Pillar 3 of the Basel framework aims to promote market discipline through disclosure requirements for banks.

Detailed explanation-2: -Basel III was intended to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage. The global capital framework and new capital buffers require financial institutions to hold more capital and higher quality of capital than under current Basel II rules.

Detailed explanation-3: -The Basel III accord raised the minimum capital requirements for banks from 2% in Basel II to 4.5% of common equity, as a percentage of the bank’s risk-weighted assets. There is also an additional 2.5% buffer capital requirement that brings the total minimum requirement to 7%.

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