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FINANCIAL MARKET COURSES

Basel III - Capital

The financial crisis highlighted that both the quality and quantity of bank capital was insufficient to meet the losses that occurred. The size and nature of the losses, and the need to enlist government support to prevent bank failures, quickly galvanized the Basel Committee on Banking Supervision (BCBS) and the regulatory community to rethink the capital adequacy rules and minimum ratios (among other issues).

 

This course describes the changes to the capital requirements under Basel III, including the tighter definition of qualifying capital and increased focus on CET1, the new capital buffers, and the revised minimum ratios. The impact of these changes on banks’ capital structures are explored, as are the implementation issues during the transition period.

  • OBJECTIVES

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

    Describe the key elements of the amended capital adequacy regime under Basel III

    Define the concept of "qualifying capital" and understand the importance of common equity capital (CET1)

    Explain why additional capital buffers (capital conservation buffer and countercyclical capital buffer) were needed and what these buffers are

    Detail the timelines for full implementation of the Basel III capital requirements and summarize the key implementation issues

  • COURSE OUTLINE

    Topic 1: Capital Adequacy under Basel III

    Capital Adequacy Ratio (CAR)

    Qualifying Capital

    Loss-Absorbing Capital

    Going Concern versus Gone Concern Capital

    Changes to the Tiering Structure

    Topic 2: Qualifying Capital

    Tiering in Basel III

    o Tier 1 Capital: Common Equity Capital (CET1)

    o Tier 1 Capital: Additional Tier 1 (AT1)

    o Tier 2 Capital

    o Deductions

    Topic 3: Capital Buffers & Revised Capital Ratios

    Procyclicality & Capital Buffers

    Capital Conservation Buffer

    Countercyclical Capital Buffer

    Revised Capital Ratios

    Topic 4: Implementation of Capital Requirements

    Transitional Arrangements

    Implementation Issues

    o Capital Replenishment

    o Deleveraging

    o Economic Weaknesses

    o Consistency

    o Will Basel III Make A Difference?

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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