BANKING AFFAIRS

Detailed explanation-1: -The New Capital Adequacy Framework prescribed for the banks is commonly known as Basel Accord. The Basel Accords are the three series of banking regulations. It requires financial institutions to maintain enough cash reserves to cover operational risks.

Detailed explanation-2: -Issued initially in July 1988 by the Basel Committee on Banking Supervision, the Basel Capital Adequacy Accord is a risk based capital adequacy methodology that defines the components of capital and applies a series of risk weights and capital charges to banks’ assets and holdings of financial instruments.

Detailed explanation-3: -Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by their operations. The Basel accords are a series of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

Detailed explanation-4: -Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. 1 The capital adequacy ratio measures a bank’s capital in relation to its risk-weighted assets.

Detailed explanation-5: -Basel 4 included new standards for credit risk and operational risk and a credit valuation adjustment. It also introduced an output floor, revisions to the definition of the leverage ratio and the application of the leverage ratio to global systemically important banks.