What is BASEL-III?
BASEL-III is a milestone in the supervision of banking systems in the world which defines guidelines for stringent supervision of the banks across the world and thereby sets standards for the same. It gives regulations for capital adequacy in banks, liquidity risk in markets and also stress testing. The norms of BASEL are formulated by BCBS or Basel Committee on Banking Supervision. Latter was formed by Bank of International Settlements (BIS), in Basel, Switzerland. It was released in December 2010. It is a comprehensive reform for fostering regulation, supervision and management of risk in the banking sector. It was the financial crisis of 2008 which necessitated the accord. There were three broad objectives:
- To increase disclosure and transparency in the system
- Improve risk management strategies
- Enhancing the ability of the banking sector to absorb any financial and economic stresses.