CASE STUDY ON BASEL III BY ASHISH SIR
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
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What is the primary objective of the Basel III framework?
Basel III aims to strengthen the regulation, supervision, and risk management of banks by improving the banking sector's ability to absorb shocks arising from financial and economic stress, thereby reducing the risk of spillover from the financial sector to the real economy.
What is the minimum CET1 ratio including Capital Conservation Buffer under Basel III?
7% (4.5% CET1 + 2.5% CCB)
What are the three pillars of the Basel III framework?
The three pillars are: Pillar 1 (Minimum Capital Requirements), Pillar 2 (Supervisory Review Process), and Pillar 3 (Market Discipline through disclosure requirements).
What is the Standardised Approach for measuring Credit Risk under Basel III?
Risk weights assigned based on external credit ratings of borrowers
What is the minimum Common Equity Tier 1 (CET1) ratio prescribed under Basel III?
Under Basel III, banks are required to maintain a minimum CET1 ratio of 4.5% of Risk-Weighted Assets (RWAs) at all times.
What is the Internal Ratings-Based (IRB) approach under Basel III for credit risk?
Banks use their own internal models to estimate credit risk parameters
What is the Capital Conservation Buffer (CCB) under Basel III and what is its prescribed level?
The Capital Conservation Buffer is an additional layer of CET1 capital of 2.5% of RWAs that banks must build up outside periods of stress, bringing the effective minimum CET1 requirement to 7% (4.5% + 2.5%).
What does the term 'Going Concern' capital mean in Basel III context?
Capital available to absorb losses while bank continues operating
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