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Basel introduction
- 2. Presentation Topic: Basic Understanding of Basel Agreements Course: Finandamentalsof Financial Management WS 09/10 CourseInstructer: Prof. Dr. Gruner PresenationBy: Mehar Muhammad Ashfaq Date: November 24, 2009 Coburg University of Applied Sciences-Germany
- 4. Basel I:
- 5. Overview
- 7. Achievements
- 8. ´Basel II:
- 9. Overview
- 11. DifferenceBetween Basel I & Basel II.
- 13. Overview on Basel Committee Founded in 1974 By Central Bank Governors of G10 (Belgium, Canada, France, Germany, Italy, Japan, Luxemburg, Netherlands, Spain, Sweden, Switzerland, UK, US) Focus: Banking Supervision Objectives: Adequate Supervision No Internationally Active Bank Should EscapeSupervision Meets 4 Times a Year Around 30 Working Groups / Task Forces Location of Secretariat: Basel, Switzerland 5 Mehar Muhammad Ashfaq
- 14. Basel I – 1988 Agreement 6 Mehar Muhammad Ashfaq
- 15. Shortcomings of Basel I Capital Required did not Mirror a Bank’s True Risk Profile. Too Simple for Advanced Banks. Inflexible Against New Developments. Covers Only Credit and Market Risks. Only Quantitative in Nature. Limited Recognition of Collateral. 7 Mehar Muhammad Ashfaq
- 16. Basel I - Achievements Definition of Capital – First to be Internationally Accepted Capital adequacy – First International Benchmark Regulatory Capital Adequacy - Accepted Soundness Indicator Risk Management Orientation Credit Risk: Simple Measure Market Risk: Simple and Advanced Measures Simple to Apply – Contributed to its Acceptance Outcome: Basel I Adopted in over 100 Countries 8 Mehar Muhammad Ashfaq
- 17. Global Developments & Basel I Globalization Growth in Cross-Border Trade, Finance& Investment. Technological Advances Computing Power and Storage Networks and Communications Financial Engineering (Development of Highly Sophisticated/Complex Products) Above Causes are Reasons for Change……. 9 Mehar Muhammad Ashfaq
- 18. 2006 …… Basel IIObjectives of Basel II Greater Emphasis on Internal Assessment of Risk. Comprehensive Framework for Credit, Market and Operational Risk. Encourages Rigorous Bank Supervision. Ensures Market Transparency, Disclosures. More Risk sensitive; Better Align Regulatory Capital with Actual Risk Exposure. 10 Mehar Muhammad Ashfaq
- 19. Overview of Basel II 11 Mehar Muhammad Ashfaq
- 20. Difference: Basel I Vs Basel II 12 Mehar Muhammad Ashfaq
- 21. Conclusion Basel II as a law in EU. 1 January 2008 EU & US delayed January 2009. Lenders Sophistication in Risk Management. Tier 2 Capital: 8% of Risk-Weighted Assets. Tier 1 Capital: atleast 4% of Risk-Weighted Assets. Thinking Point……….Sub-prime Financial Crisis. 13 Mehar Muhammad Ashfaq
- 22. Thanksfor Listening……. For Feedback Mehar Muhammad Ashfaq MBA Financial Management ashfaq8585@hotmail.com Coburg University of Applied Sciences-Germany 14 Mehar Muhammad Ashfaq