Basel introduction
- 2. Presentation Topic:Basic Understanding of Basel AgreementsCourse: Finandamentalsof Financial Management WS 09/10CourseInstructer: Prof. Dr. GrunerPresenationBy:Mehar Muhammad AshfaqDate: November 24, 2009Coburg University of Applied Sciences-Germany
- 3. Basic Understanding of Basel Agreements ThrustofPresentationHistorical Aspects
- 4. Basel I:
- 5. Overview
- 7. Achievements
- 8. ´Basel II:
- 9. Overview
- 11. DifferenceBetween Basel I & Basel II.
- 12. SummaryWhatis Basel……….?4Mehar Muhammad Ashfaq
- 13. Overview on Basel Committee Founded in 1974By Central Bank Governors of G10 (Belgium, Canada, France, Germany, Italy, Japan, Luxemburg, Netherlands, Spain, Sweden, Switzerland, UK, US)Focus: Banking SupervisionObjectives:Adequate SupervisionNo Internationally Active Bank Should EscapeSupervisionMeets 4 Times a YearAround 30 Working Groups / Task ForcesLocation of Secretariat: Basel, Switzerland5Mehar Muhammad Ashfaq
- 14. Basel I – 1988 Agreement6Mehar Muhammad Ashfaq
- 15. Shortcomings of Basel ICapital Required did not Mirror a Bank’s True Risk Profile.Too Simple for Advanced Banks.Inflexible Against New Developments.Covers Only Credit and Market Risks.Only Quantitative in Nature.Limited Recognition of Collateral.7Mehar Muhammad Ashfaq
- 16. Basel I - AchievementsDefinition of Capital – First to be Internationally AcceptedCapital adequacy – First International BenchmarkRegulatory Capital Adequacy - AcceptedSoundness IndicatorRisk Management OrientationCredit Risk: Simple MeasureMarket Risk: Simple and Advanced MeasuresSimple to Apply – Contributed to its AcceptanceOutcome: Basel I Adopted in over 100 Countries8Mehar Muhammad Ashfaq
- 17. Global Developments & Basel IGlobalizationGrowth in Cross-Border Trade, Finance& Investment.Technological AdvancesComputing Power and StorageNetworks and CommunicationsFinancial Engineering (Development of Highly Sophisticated/Complex Products)Above Causes are Reasons for Change…….9Mehar Muhammad Ashfaq
- 18. 2006 …… Basel IIObjectives of Basel IIGreater Emphasis on Internal Assessment of Risk.Comprehensive Framework for Credit, Market and Operational Risk.Encourages Rigorous Bank Supervision.Ensures Market Transparency, Disclosures.More Risk sensitive; Better Align Regulatory Capital with Actual Risk Exposure.10Mehar Muhammad Ashfaq
- 19. Overview of Basel II11Mehar Muhammad Ashfaq
- 20. Difference: Basel I Vs Basel II12Mehar Muhammad Ashfaq
- 21. ConclusionBasel II as a law in EU.1 January 2008 EU & US delayed January 2009.Lenders Sophistication in Risk Management.Tier 2 Capital: 8% of Risk-Weighted Assets. Tier 1 Capital: atleast 4% of Risk-Weighted Assets.Thinking Point……….Sub-prime Financial Crisis.13Mehar Muhammad Ashfaq
- 22. Thanksfor Listening…….For FeedbackMehar Muhammad AshfaqMBA Financial Managementashfaq8585@hotmail.comCoburg University of Applied Sciences-Germany14Mehar Muhammad Ashfaq