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History Bank for International Settlement

History of the Bank for International Settlement (BIS) was founded in 1930, making itworlds oldest international financial institution and remains the principal center forinternational central bank cooperation (Felsenfeld & Bilali, 2004; Toniolo, 2005). OnJanuary 20, 1930, the BIS was established at the Hague Conference (Hague Conventionof 1930) in the context of the Young Plan or Dawes Loans (the international loans issuedto finance reparations) which can dealt with the coordinating settlement of reparationpayment by the German government and its allies after First World War (Felsenfeld &Bilali, 2004). The primary intention of Banks founders was to create a focus forcooperation among central banks. Thus, the BIS act as the bank for central banks toaccept deposits of a portion of the foreign exchange reserves of central banks and investthem prudently for a yield in market return (Bank for International Settlements ArchiveGuide, 2007).

Following the World War II until early 1970s, BIS monetary policy focused onimplementing and defending the Bretton Woods system (BISA Guide, 2007). In the

1970s and 1980s, the focus was on managing cross-border capital flow transactionsfollowing the oil crises and the international debt crisis. The 1970s crisis also brought theissue of regulatory supervision of internationally active banks to the fore, resulting in the1988 Basel Capital Accord and its "Basel II " revision of 2001-2006. More recently, theissue of financial stability in the wake of economic integration and globalization, ashighlighted by the 1997 Asian crisis, has received a lot of attention. Next is relating to themonetary unification of Europe. BIS was the key meeting place for European centralbankers as they laid the groundwork for monetary union from the mid- 1970s to early1990s. Since the increase in globalization, deregulation and sophistication of financialmarkets have focused the attention of the BIS firmly on the issues related to thesoundness of the international financial architecture and the threats posed by systemic

risks (BISA Guide, 2007).

History of Basel

The Basel Committee on banking supervision (the committee) has been dealing with thecreation of a framework to measure capital adequacy on a multinational scale as aguideline for an appropriate capital level of internationally active banks (Bieg & Kramer,2006). It was commenced in respect that a frighteningly low level of the capital whichwas held by most banks worldwide. The aim of the Committee was also include thatremoving the disadvantages in competition between banks which resulted from different

capital requirements of different states. The results of the Committees work were socalled as International Convergence of Capital Measurement and Capital Standard, it alsoknown as Basel Capital Accord, Basel Capital Adequacy Framework or in short Basel Iwhile it is adoption in July 1988 (Bieg & Kramer, 2006). The implementation of Basel Ibecame effective as of the year-end 1992. Meanwhile, Basel I has been changed on asmall scale by amendments and revisions that are amendment to the capital accord toincorporate market risks and also called market risk amendment regarding the treatment

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of market risk in January 1996 (Bieg & Kramer, 2006). The changes were necessarysince Basel I just limited only for a banks credit risks that will influence losses due to thereason for a banks poor performance. The changes to the Basel I framework made by theMarket Risk Amendment became effective as of year-end 1997.

Due to the capital framework is no longer up-to-date and is effective in reaching thetarget of the Basel Committee on Banking Supervision so that the Committee publishedthe first consultative paper concerning Basel II (The New Basel Capital Accord) inJune1999. Interested parties (foremost banks) were given the chance to comment on theseproposals until the end of March 2000. In January 2001, second consultative paperconcerning Basel II was published that contains the revision of the first consultativepaper of 1999 concerning the fundamental adjustment of the capital adequacy frameworkof 1988 and took into consideration many comments and suggestions made by bankswithin the first comment period (Bieg & Kramer, 2006). In the planned implementationof Basel II at the year-end of 2004 was postponed until the end of 2006. In order to beable to include the suggested comments for improvement in the framework, theCommittee decided to postpone the completion of Basel II which should actually have

been adopted at the end of 2001 and to publish a third consultative paper in April 2003(Bieg & Kramer, 2006). The deadline for the third comment period was 31 July 2003.

Basel III is a work in progress that is far from completion. Basel III is a consultativedocument entitled Strengthening the Resilience of the Banking Sector that was firstpromulgated on 17 December 2009 by the Basel Committee on Banking Supervision atthe BIS (Eubanks, 2010). On December 2010, the Basel Committee released a near finalversion of its amendments to Basel II that can be referred to as Basel III (Eubanks, 2010).This Basel III is entitled A Global Regulatory Framework for More Resilient Banks andBanking Systems (Eubanks, 2010). Besides, the Basel Committee issues a final elementof the reforms to raise the quality of regulatory capital on January 13, 2011(Eubanks,

2010).

Indicator of Basel I

Basel I is primarily focus on credit risk which is the risk weighted assets of the bank.There are three general purposes of Basel I. Basel I is created to promote theharmonization of regulatory and capital adequacy standards only within the memberstates of the Basel Committee, to provide adequate capital to guard against risk in thecreditworthiness of a banks loan book and proposes minimum capital requirements forinternationally active banks, and invites sovereign authorities and central banks alike to

be more conservative in their banking regulations. (Balin, 2008)

The Basel I Accord divides itself into four pillars. The first pillar is The Constituents ofCapital which define capital in two board terms which is tier 1 capital and tier 2 capital.(Balin, 2008) Tier 1 capital also known as core capital that are consist of the universallyrecognized elements of shareholders equity, retained earnings and perpetual preferredstock. The elements such as asset revaluation reserve, subordinated debt, general loan-

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loss reserves and hybrid capital instruments were specified as tier 2 capital. (Fadi Zaher,2011)

The second pillar is Risk Weighting which creates a comprehensive system to risk-weighta banks assets, or in other words, its loan book. In order to allow for different riskprofiles, risk weighted capital are placed into 4 categories. The higher the assets creditrisk, the higher their weight. Category 1 (0% weight) consists of riskless assets which areinclude cash, claims on central governments and central banks denominated in nationalcurrency and funded in that currency, other claims on OECD countries, centralgovernments and central banks, claims collateralized by cash of OECD centralgovernment securities or guaranteed by OECD central governments. Category 2 (20%weight) consist of low risk assets .Securities in this category include multilateraldevelopment bank debt, bank debt created by banks incorporated in the OECD, non-OECD bank debt with a maturity of less than one year, cash items in collection, and loansguaranteed by OECD public sector entities. Category 3 (50%) consist of moderate riskasset which is only includes residential mortgages. Category 4 (100%) consist of highrisk assets. This category include a banks claims on the private sector, non-OECD bank

debt with a maturity of more than one year, claims on non-OECD dollar-denominateddebt or Eurobonds, equity assets held by the bank, and all other assets. (Balin, 2008)

Capital adequacy ratio= Total capital (tier 1+ tier 2)

Risk weighted assets

The third pillar is A Target Standard Ratio. Minimum risk-based capital adequacy orminimum capital requirement which is 8% is specified in Basel I in order to help bankcovers unanticipated losses. This is a universal standard that banks should hold. In orderto lower credit risk, bank should hold minimum requirement of 8% total capital to itsrisk-weighted assets ratio. This capital requirement is focus in reducing credit risk. Withhigher amount of capital, banks have more to lose if they take on too much risk. Capitalrequirements reduce the probability of banks to take excessive risk. Thus make the bankbecome more stable. Moreover, Tier 1 capital must cover 4% of a banks risk-weightedassets. This ratio is seen as minimally adequate to protect against credit risk in depositinsurance-backed international banks in all Basel Committee member states. (Balin, 2008)

The fourth pillar is Transitional and Implementing Agreements which sets the stage forthe implementation of the Basel Accords. Each countrys central bank is requested tocreate strong surveillance and enforcement mechanisms to ensure the Basel Accords arefollowed, and transition weights are given so that Basel Committee banks can adaptover a four-year period to the standards of the accord. (Balin, 2008)

The Basel I Capital Accord aimed to reducing the credit risk through the capitalrequirement ratio. Although Basel I is successfully issued but most of the people does notknow why they need to follow this requirement, they just follow it blindly. Besides that, afocus on bank capital at a point in time may not be effectively in indicating whether abank is taking on excessive risk in near future. In addition, its over-simplifiedcalculations, and classifications have simultaneously called for appearance of Basel IICapital Accord. The introduction of Basel II is to improve Basel I and teach bank how to

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manage the risk in order to make the bank become more stable. (Zaher, 2011)

Limitation/Argument of Basel I

The shortcomings of Basel I included its failure to recognize differing credit qualitywithin the same general asset type as well as its varying the capital charge with the creditexposures legal form, such as whether it is on or off balance sheet and its simplisticapproach to risk transference and credit risk mitigation (Rutledge, 2005). More generally,Basel I was not structured to keep pace with the rapid rate of financial innovation that wehave seen in internationally active banks (Rutledge, 2005). It clearly has createdincentives for capital arbitrage, with banks able to structure transactions with the primary

goal of minimizing regulatory requirements without a commensurate reduction in risk(Rutledge, 2005). Similarly, it has resulted in distortions in bank activity, by creating atax on certain activities while understating the risk for others (Rutledge, 2005). Thesehave combined to make the regulatory capital metric less informative to investors,supervisors and counterparties, and have eroded the principle of adequate risk-basedcapitalization that the Basel Accord was designed to promote.

However, Rutledge, 2005 also argued that the weaknesses of the current regulatorycapital framework are much more relevant to the supervision of the largest and mostsophisticated banks than they are generally across the industry. For the vast majority ofthe thousands of U.S. banks, the existing regime largely works. In recognition of this,among other considerations, we expect that in the U.S. most banks will stay on Basel I

while the largest and internationally active banks will adopt the advanced Basel IIapproaches (Rutledge, 2005). Besides, the lack of risk sensitivity and incentives forarbitrage have made Basel I less relevant in our supervision of the largest banksit is abenchmark requirement to be met, but not, in practice, a critical discriminating factor aswe judge their financial condition (Rutledge, 2005).

The current stage of development of economic capital modelingthe differences inmodel construction, assumptions and coveragelimit our ability to make comparisons ofthe results across institutions argued by Rutledge, 2005. More generally, economiccapital models clearly remain in an early evolutionary stage, most particularly regardingoperational risk. Their early stage of development can also be seen in the relative paucity

of disclosed economic capital estimates by banking firms. Only very recently have webegun to see that some bankers have sufficient confidence in the quality of theireconomic capital estimates, even of credit risk, to disclose them publicly (Rutledge,2005).

Changes of Basel I to Basel II

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Due to some criticism in Basel I, the committee believes that the revised Framework willpromote the adoption of stronger risk management practices by the banking industry, andviews this as one of its major benefits (BIS, 2004). The reason the committee revise the1988 Accord is to develop a framework that would further strengthen the soundness andstability of the international banking system. Basel I only required bank to achieve the

minimum capital adequacy ratio. It only involves the measurement of credit risk andignores all the risk that will appear in bank as referring to appendix 1. Basel II goes wellbeyond this, allowing some lenders to use their own risk measurement models tocalculate required regulatory capital whilst seeking to ensure that lenders establish aculture with risk management at the heart of the organization up to the highest manageriallevel.

The main difference is that the Basel I accord mainly focused on capital requirements forbanks and in contrast, Basel II adds supervision and market discipline to these capitalrequirements through the "Three Pillar" concept (Council of mortgage lenders, 2011).

Indicator of BASEL II

According to commend on Basel II proposal can see that banks and other interestedparties have agree and welcome the three pillars approach. Most of them are totallysupport improve capital regulation and risk management practice. 3 pillars in Basel IIwhich are minimum capital requirements, supervisory review and market discipline.

In Pillar 1, banks are provided a range of options about capital requirements for creditrisk and operational risk. So the supervisors of bank may choose the most appropriateaccording their operations and financial market infrastructure (Francis, 2006). In addition,This framework allows a country to decide where each option can be used in limited

ways, to meet the standards of the domestic market in different conditions. This revisedFramework is more risk sensitive compare to 1988 Accord. Those countries where risksin the local banking market are high nonetheless need to consider if banks should berequired to hold additional capital over and above the Basel minimum.

In Pillar 2, home country supervisors have a very important role in leading the enhancedcooperation between home and host country supervisors. But it will be required foreffective implementation. The AIG is developing practical arrangements for cooperationand coordination that reduce implementation burden on banks and conserve supervisoryresources. Based on the work of the Accord Implementation Groups, and based on itsinteractions with supervisors and the industry, the Committee has issued generalprinciples for the cross-border implementation of the revised Framework and morefocused principles for the recognition of operational risk capital charges under advancedmeasurement approaches for home and host supervisors (BIS, 2004; Kupiec, 2006; BaselCommittee, 2001). Besides, the Committee would like to highlight the need for banks andsupervisors to give appropriate attention to the second pillar (supervisory review).

The third pillar is about the market discipline (Calomiris, 1998) and it is to complementthe minimum capital requirements which stated in Pillar 1 and the supervisory review

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process stated in Pillar 2. In here, the Committee aims to developed market discipline bycome out a set of disclosure requirements which will allow market participants to fullyassess all the information on the scope of application, capital, risk exposures, riskassessment processes, and hence the capital adequacy of the institution.

Limitation/Argument of Basel II

Basel II regulations have faced several criticisms since its first release. For example,Jandl & Valverde stated that Basel II have faced the pro-cyclicality problem. Accordingto some academics, the new regulations and exigencies discussed in Basel II willheighten the business cycles. The criticism relies of the fact that whenever is a downturnin the economy, banks credit risk assessment models or rating agencies will be promptedto downgrade in advance the credit risk profiles due to a riskier environment. With thesedowngrades banks will need to increase its capital holdings at increased costs, reducing

their lending activity, which in turn will worsen the initial turndown cycle. It is worthmentioning that this does not imply that a cut in lending is unsafe in recession periods;however, the said reduction is strongly related to the shadow value of bank capital,which measures the scarcity of bank capital relative to positive-NPV lendingopportunities. A higher shadow value of bank capital indicates a greater relative scarcityand hence more severe problems of underinvestment in terms of lending (Kashyap &Stein, 2004). Moreover, Basel II regulations to measure credit risks may be not flexibleenough to prevent from a heightened increase of the shadow value of bank capital, whichwill lead to the aforementioned pro-cyclicality said by Kashyap and Stein, 2004.

Secondly, Basel II also faced complex implementation problem (Jandl & Valverde). In

many cases, Basel II regulations require the upgrade of supervisor powers in order tofully accomplish the supervisory review process described in Pillar II. Besides, thedisclosure requirements of Pillar II largely exceed current practices, which may generatedelays in the implementation of Basel II due to negotiations between Supervisors andBanks (Jandl & Valverde). Furthermore, operational risk is still being assessed as farfrom being accurate (Jandl & Valverde). Other than that, banks needs vast historical datato calculate the default risk, which in many cases is too costly (Jandl & Valverde).

Thirdly, threatens banking competition was once of the problem faced by Basel II (Jandl& Valverde). The application of the IRB approaches will allow the reduction of capitalrequirements, favouring large banks, which are the more likely to implement them.Different approaches will widen the difference between banks, getting farther from the

standardization target of Basel Committee. Finally, the adaptation to Basel IIrequirements will be costly for emerging market, reducing their competitivenessinternationally.

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Changes of Basel II to Basel III

In order to cover the limitation of basel II, basel III is carried out by Bank forInternational Settlement. Basel III is more advance than Basel II and it consist of 4 major

components which are Quality, consistency and transparency of the capital base(Greater

emphasis placed on the common equity component of Tier 1 capital, simplification ofTier 2, elimination of Tier 3, detailed regulatory capital disclosure requirements ascompared to basel II), enhancement of risk coverage through enhanced capitalrequirements for counterparty credit risk (Enhanced risk coverage will address issues thatarise in connection with the use of derivatives, repos, and securities financingarrangements), Changes to non-risk adjusted leverage ratio(This ratio will supplement theBasel II risk capital framework) and measures to improve countercyclical capitalframework which are not been addressing in Basel II. Further than that, additional capitalconversation buffer, additional countercyclical buffer, additional requirements forsystemically important financial institutions and leverage ratio has been added to BaselIII and these measurement do not exist in Basel II as referring to Appendix 2.

Indicator of Basel III

Basel III is a comprehensive set of reform measures, developed by the Basel Committeeon Banking Supervision, to strengthen the regulation, supervision and risk managementof the banking sector. These measures aim to: improve the banking sector's ability toabsorb shocks arising from financial and economic stress, whatever the source, improverisk management and governance end eventually strengthen banks' transparency anddisclosures (International regulatory framework for banks: Basel III).

Furthermore, the reforms are targeting the bank-level, or microprudential, regulation,which will help raise the resilience of individual banking institutions to periods of stress(International regulatory framework for banks: Basel III). Despite from that,macroprudential, system wide risks that can build up across the banking sector as well asthe procyclical amplification of these risks over time.

Under Basel III, there will be strengthening of the quality of capital required to be heldby banks. The minimum capital ratio for common equity, which is the highest form ofloss absorbing capital, will increase to 4.5% from the current level of 2%. The Tier 1capital ratio (which includes common equity and other qualifying financial instrumentsbased on stricter criteria) will increase from 4% to 6%.

Banks will also be required to hold a separate capital conservation buffer comprising 2.5%of common equity. The intention behind this new requirement is to ensure that banksmaintain a buffer of capital that can be used to absorb losses during periods of financialand economic stress (Basel III announced). Banks will be allowed to draw upon thebuffer during such periods but, should they do so, they will face constraints on earningsdistributions. This framework is intended to reinforce the objective of sound supervision

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and bank governance, and address the issue of the collective failure of banks to curtaildistributions such as discretionary bonuses and high dividends, evenwhen faced with deteriorating capital positions.

A countercyclical buffer will also be implemented, according to national circumstances

(Basel III announced). This buffer will range from 0% to 2.5% of common equity orother fully loss absorbing capital. Its purpose is to achieve the broader macro-prudentialgoal of protecting the banking sector from periods of "excess aggregate credit growth".For any given country, the countercyclical buffer will only be in effect when there isexcess credit growth resulting in a system wide build up of risk. Decisions on wheneconomies have entered such periods will be taken by national regulators. Once put intooperation, the countercyclical buffer will be introduced as an extension of the capitalconservation buffer. The above capital requirements will be supplemented by theintroduction of a non-risk based leverage ratio. A minimum Tier 1 leverage ratio of 3%will be tested during the period from 1 January 2013 to 1 January 2017.

Besides, in order to improve risk coverage, higher capital requirements for trading andsecuritisation activities imposed, Basel III will further highlight the enhancement ofcapital requirements and risk management standards for counterparty credit riskexposures arising from derivatives, repos and securities financing activities (Basel IIIrules published, 2010). Basel III contains measures in relation to the use of external creditratings in the capital framework as well In addition, a combination of a minimumliquidity coverage ratio to enhance short-term cash flow resilience and a structuralminimum net stable funding ratio to encourage banks to better match the liquidity profileof their assets and liabilities are to be introduced (Basel III rules published, 2010).Appendix 3 has further shown the phase in arrangement for Basel III.

Basel III is at the core of the G20's efforts to apply lessons learnt from the globalfinancial crisis. Regulators have said that they hope that the changes will push bankstowards less risky business strategies and ensure that they have enough reserves towithstand financial shocks, thus avoiding a repeat of the recent crisis (Basel IIIannounced).

Limitation/Argument of Basel III

Basel III received harsh criticisms from the banking industry and some regulators. TheEuropean banks were most critical of the proposal, arguing that Basel III favors U.S.banks because U.S. banks historically maintained a higher level of capital and wouldmore easily meet the quantitative increase in capital. Moreover, it is much harder to raisecapital from the private sector in Europe than in America (Eubanks, 2010). The Instituteof International Finance, which represents the worlds largest commercial banks, warnedin June 2010 that the December 2009 Basel III proposal would require that these largerbanks raise $700 billion in common equity and issue $5.4 trillion in long term debt overthe next five years to meet the standards. The absorption of capital would cause a 3%

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decline in the United States GDP compared with what it would be otherwise in fiveyears (Pruzin, 2010).

JP Morgan Chase and Morgan Stanley, 2010 argued that the Basel III proposal wouldsignificantly reduce the availability of credit to the U.S. economy. The AmericanSecurities Forum, 2010 said that Basel IIIs liquidity coverage ratio could have acatastrophic effect on the short-term global capital markets. The main reason is that theliquidity ratio would require banks at all times to hold a stock of highly liquid assets thatequal or exceed their net cash flow calculated over a 30-day period. This liquidity wouldsignificantly reduce short-term funds needed to issue short-term debt securities, such asmoney market instruments and corporate and municipal bonds. The Deutsche Banks,2010 comment was that the timetable was too short to increase common equity becausethe prospects for future profits, the main source of common equity, are not good in theshort run. The French Bankers Association, 2010 assessment was that the adjustment toBasel III was unworkable because it would result in a Tier 1 capital shortage of between$2.7 trillion and $4.7 trillion for the Euro-zone countries alone.

The Basel Committee on Banking Supervision made its own assessment of the Basel IIIproposals impact on the global economies. It reported its findings in a document entitled,An Assessment of the Long-term Impact of Stronger Capital and Liquidity Requirements,on August 18, 2010. The finding of the Basel Committees assessment was that highercapital and liquidity requirements can significantly reduce the probability of a bankingcrisis. Taking a different approach to assessing the benefits of Basel III, the committeefound that the incremental benefits decline at the margin. Consequently, the benefits arerelatively large when capital ratios are increased from low levels and progressivelydecline as standards tighten. For example, the committee found that the decrease in thelikelihood of a crisis is three times larger when capital is increased from 7% to 8% thanwhen capital is raised from 10% to 11%. The assessment concluded that better

capitalization reduces both the likelihood of crises and the severity of crises when theyoccur.

Recommendation

The first recommendation is accelerate the work on redefining capital (Banking on Basel,2008). The Basel Committee proposed that there is a need to revise the definition of thetier 1 and tier 2 capitals. Thus the first recommendation is approval of the committees

agenda rather than a call for a change of itinerary. However, the rather deliberate pacewith which the committee has begun this review should be speed up. From the subprimecrisis we can know that the importance of ensuring that regulatory capital in factpossesses the steady buffering characteristics that should define core capital.

Besides, communication of the leverage ratio with the higher levels of liquid assetsshould be taken into concerned, which probably can increase the ratio calculation(Consultative proposals to strengthen the resilience of the banking sector, 2010). They

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also impose a doubt in whether the same leverage ratio level can be applied foressentially dissimilar business models. For example, there is a difference between fullysecuritizing mortgages and make it become off balance sheet and use mortgage-backedbonds for funding but leaving them on balance sheet. They recommend that theCommittee consider differential calibration levels that take these differences into account.

In Consultative proposals to strengthen the resilience of the banking sector (2010) alsostate that supervisors should oppose the comprehensible result to relate extremelyconservative capital requirements to trading activities. The trading book prudentialframework and capital requirements need to be risk sensitive in order to minimizearbitrage opportunities, and remain effective in the long run. That is a need to betransparent to financial market participants that trading book capital is generallycorrelated with the level of economic risk, although overlaid with justifiable conservatism.

Lastly, planning in advance for orderly resolution is the most important issue (Report andRecommendations of the Cross-border Bank Resolution Group, 2010). In 2007 crisis, itcan demonstrate there are many challenges in order to have orderly resolution of complex

cross-border financial institutions in a global financial crisis. The crisis has identified thatthorough crisis prevention must take into account to corporate form and the operation ofnationally based insolvency procedures. Even some large financial institutions providefunctions that are systemically important, similar in some sense to infrastructures orpublic utilities, their business connection and contingency planning preparations have nottypically been required to include resolution contingencies. While no successful businessconducts in a wind-down mode, resolution contingency planning should become a partof the supervisory process for large and complex cross-border institutions.

Conclusion

As a conclusion, the Basel agreement is useful. The new agreement, the bank has

developed a new capital standards to ensure that banks hold sufficient reserves to not rely

on Government assistance independent of future financial crises can occur and can avoid

the banks in real estate loans, commercial loans, credit card business in a large number of

risks and obligations, to create a more stable Ugg Classic financial system (The

Independent,2010).Besides, The European Central Bank President Trichet mentioned that

the Basel Agreement is the fundamental to strengthening global bank capital ratios, and it

could helped to sustain the long-term financial stability and economic growth (EuropeanCentral Bank,2011). In addition, In the United States, Canada, the United Kingdom, the

Bank has raised a number of new capitals, which reduced their debt level (The

Independent, 2010).

Based on our own opinion in order to develop Basel III in our country, the pre-testing

(pilot test) should be conducted before it. This pilot test is to testing the effect of the new

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regulation which may influence the country economic. We need to test that any effect

that could affect country consumption, investment, government spending and export and

import. Besides, before implement the Basel III the new solution for any problem caused

by implemented Basel III should be well prepare. In other words, the solutions need to

come out before the Basel III is implemented.

REFERENCE

American Securitization Forum (2010). Comment on the Consultative Documents:

International framework for liquidity risk measurement, standards and monitoringand strengthening the resilience of the banking sector. P. 4, Retrieved fromhttp://www.bis.org/publ/bcbs165/americansecurit.pdf

Association Francaise Des Societes Finacieres (2010). ASFs Position on PossibleFurther Changes to the Capital Requirement Directive (CRD IV), Retrieved fromhttp://www.asf-france.com.

Balin, B. J. (2008). Basel I, Basel II, and emerging markets: A nontechnical analysis. TheJohns Hopkins University School of Advanced International Studies (SAIS),Retrieved from http://www.policyarchive.org/handle/10207/bitstreams/11484.pdf

Bank for International Settlements, Basel Committee on Banking Supervision,Assessment of the long-term economic impact of stronger capital and liquidityrequirements, Basel, Switzerland, August 18, 2010.

Bank for International Settlements Archive Guide (2007).BIS Foundation and History,7.16(2.) Retrieved January 18, 2007, from www.bis.org/about/arch_guide.pdf

Banking On Basel. (2008). Retrieved from http://bookstore.piie.com/book-store/4235.html

Basel Committee. (2001). Overview of the new basel capital accord. Con-sultativedocument BCBS, Basel, Switzerland.

Basel III announced. Retrieved from

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http://www.dlapiper.com/files/Publication/a8f806c1-e5b6-4890-aaf8-5a27cbb58d29/Presentation/PublicationAttachment/e8c797ea-e25a-4d01-97b3-6f6f5715b6e0/DLA_Piper_UK_Basel_III_Announced.pdf

Basel III: A risk management perspective (2010). Retrieved from

http://www.pwc.com/lu/en/risk-management/docs/pwc-basel-III-a-risk-management-perspective.pdf

Basel III rules published (2010). Retrieved fromhttp://www.whitecase.com/files/Publication/2bb064cc-f908-45d9-add5-bb8315fbd3ee/Presentation/PublicationAttachment/a3061fa3-9c1a-4d57-a07e-cb955b39c8a1/alert_Basel_III_Rules_Published.pdf

Bieg, H. & Kramer, G. (2006). Banking supervision in Europe: From Basel I to Basel II.

In Strategic Management-new Rules for Old European (73-82). Gabler.

Calomiris, C. W. (1998). Blueprints for a new global financial architecture. Retrievedfrom www.house.gov/jec/imf/blueprnt.htm

Consultative proposals to strengthen the resilience of the banking sector. (2009).Retrieved April 16, from http://www.bis.org/publ/bcbs165/aubaco.pdf

Deutsche Bank (2010). Retrieved April 16, fromhttp://www.bis.org/publ/bcbs165/deutschebankcap.pdf

Eubanks, W. W. (2010). The status of the Basel III capital adequacy accord.Congressional Research Service.RetrievedOctober 28, fromhttp://www.fas.org/sgp/crs/misc/R41467.pdf

Felsenfeld, C. & Bilali, G. (2004). The role of the bank for International Settlements inshaping the world financial system. University of Pennsylvania Journal ofInternational Economic Law, 25(3), 945-1045.

Jandl, E., & Valverde, K. Main features on Basel II: Final project for risk II. EuropeanSchool of Business, Retrieved fromhttp://www.globalfinance.org/portal/data/publications/students/ceram/IF/Basel2.pdf

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International regulatory framework for banks: Basel III. Retrieved fromhttp://www.bis.org/bcbs/basel3.htm

JP Morgan Chase & Co. (2010). Retrieved from

http://www.bis.org/publ/bcbs165/jpmorganchase.pdf

Kashyap, A. K., & Stein, J. C. (2004). Cyclical implications of the Basel II capitalstandards. Federal Reserve Bank of Chicago Economic Perspectives, 1st Quarter,18-31. Retrieved fromhttp://faculty.chicagobooth.edu/anil.kashyap/research/papers/basel-final2.pdf

Report and Recommendations of the Cross-border Bank Resolution Group (2010).Retrieved from http://www.bis.org/publ/bcbs162.htm

Rutledge, W. L. (2005). Basel II: Risk management and financial stability. FederalReserve Bank of New York, Retrieved 2005 May 17, fromfile:///C:/Users/user/Desktop/BO%20Assign/limitation/sources/William%20L.%20Rutledge,%202005.html

Toniolo, G. (2005). Central Bank Cooperation at the Bank for International Settlements,1930-1973. New York: Cambridge University Press.

Pruzin, D. (2010, July 27). Basel committee bends to bank pressure, issues details ofmodifications to Basel III. BNA Banking Daily, pp. 1-4.

Zaher, F. (2011). How Basel 1 affected banks. Retrieved fromhttp://www.investopedia.com/articles/07/BaselCapitalAccord.asp

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Year Description

July 1988 Adoption of Basel I (Basel Capital Accord)

End-1992 Implementation of Basel I

January 1996 Changes of the Capital Adequacy Framework to include market risks(Market Risk Admendment)

End-1997 Implementation of the Market Risk Admendment

June 1999 First consultative paper concerning Basel II (The New Basel CapitalAccord)

End-March

2000

End of the first comment period

January 2001 Second consultative paper concerning Basel II

End-May 2001 End of the second comment period

December 2001 Changes of the initial schedule for the implementation of Basel II(from end-2004 to end-2006)

Aprill 2003 Third consultative paper concerning Basel II

End-July 2003 End of the third comment period

June 2004 Adoption of Basel II

End 2006 Implementation of Basel II

December 2009 First promulgated of Basel III

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APPENDIX 1

SourceBieg, Kramer and Waschbusch (2003)

APPENDIX 2

December 2010 Final version amendment for Basel III refer to Basel II

January 2011 Final element reforms regulatory capital in Basel III

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(Basel III: A risk management perspective, 2010)

Basel III: A risk management perspective. (2010). Retrieved from

http://www.pwc.com/lu/en/risk-management/docs/pwc-basel-III-a-risk-management-

perspective.pdf

Appendix 3

Compares of Basel I, II, III

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APPENDIX 4

Basel I Basel II B

CommonEquity

Tier 1Capital

TotalCapital

CommonEquity

Tier 1Capital

TotalCapital

CommonEquity

Ti

Minimum

requirements

4% 8% 2.0% 4.0% 8.0% 4.5% 6.0%

Additionalcapitalconversationbuffer

Not applicable Not applicable 2.5%

Additionalcountercyclical bufferrange

Not applicable Not applicable 0%-2.5%

Additionalrequirements forsystemicallyimportantfinancialinstitutions

Not applicable Not applicable Mat be added to threquirements

Leverageratio

Not applicable Not applicable May in effect add trequirements

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Source: basel-iii-accord.com