RISK REGULATION IN BANKING INDUSTRY

The primary objective is to ensure financial stability and protect depositors by mandating that banks maintain adequate capital buffers and sound risk management practices.

Minimum total CAR is 8% of risk-weighted assets.

The Basel Committee on Banking Supervision (BCBS), headquartered at the Bank for International Settlements (BIS) in Basel, Switzerland, sets global standards for bank capital adequacy and risk regulation.

AT1 includes perpetual bonds and non-cumulative preference shares.

Basel III addresses the deficiencies exposed by the 2008 global financial crisis by strengthening bank capital requirements, introducing leverage ratios, and establishing liquidity standards such as LCR and NSFR.

Minimum Tier 1 capital ratio is 6% of RWA.

The Capital Conservation Buffer is an additional 2.5% of Risk-Weighted Assets (RWA) in Common Equity Tier 1 (CET1) capital that banks must maintain above the minimum capital requirement to absorb losses during stress periods.

G-SIB surcharge is extra capital (1-3.5%) for global systemically important banks.