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Basel III - An Introduction

The financial crisis highlighted that the quantity and quality of bank capital was inadequate, despite the extensive changes introduced in Basel II. In addition, the crisis underlined the need for regulators to address not simply capital adequacy but also liquidity and leverage. This is what is being done through the development and implementation of Basel III.

 

This course explains in detail how Basel III changes the nature of previous capital adequacy regimes. It also examines other areas addressed by Basel III, such as liquidity standards and leverage rules.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain some of the reasons why major changes to the Basel II requirements were deemed to be necessary

    Describe the most important changes set out by Basel III, such as capital adequacy, leverage, and liquidity

    Outline some of the key implementation issues in relation to Basel III, including the need for an extended implementation period

  • COURSE OUTLINE

    Topic 1: The Need for Basel III

    Impact of the Financial Crisis

    o Capital Injections

    o Beyond Capital Injections

    o Too Big to Fail

    Shortcomings of Basel II

    o Underestimated Risk

    o Lack of Liquidity Provisions

    o Lack of Leverage Restrictions

    o Procyclicality

    Topic 2: Key Components of Basel III

    Basel III Timeline & Key Documents

    What is Basel III?

    o BCBS Description

    Key Components of Basel III

    o Capital Standards

    o Basel 2.5 & Enhanced Risk Coverage

    o Leverage Ratio

    o Liquidity Standards

    • Liquidity Coverage Ratio (LCR)

    • Net Stable Funding Ratio (NSFR)

    Systemic Risk

    o Globally Systemically Important Banks (G-SIBs)

    o Systemically Important Financial Institutions (SIFIs)

    o Additional Tools

    Topic 3: Implementation of Basel III

    Transitional Arrangements

    Global Coordination

    Economic Cost

    Meeting the New Capital Adequacy Requirements

    o Reducing RWAs

    o Capital Raising

    Beyond Basel III

    o Ring-Fencing of Banking Businesses

    o Balance Sheet Levies

    o Bank Transaction Tax (‘Tobin Tax’)

    o Single European Regulator

    o Compensation Controls

    o Dodd-Frank Act

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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