65.‘Basel III Accord’ or simply ‘Basel III’, often seen in the
news, seeks to
- a) develop national strategies for the conservation and sustainable use of biological diversity
- b) improve banking sector’s ability to deal with financial and economic stress and improve risk management
- c) reduce the greenhouse gas emissions but places a heavier burden on developed countries
- d) transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluoro carbons in refrigeration with harmless chemicals
The correct answer is Option 2.
- Basel-III Accord:
- It was issued in 2010 as a response to the financial crisis of 2008.
- It aims to promote a resilient banking system by focusing on capital leverage funding and liquidity. Hence, Option 2 is correct.
- The capital adequacy ratio was fixed at 12.9%.
- The leverage rate was fixed at 3%.
- The banks’ strength was improved Liquidity Coverage Ratio and Net Stable Fund Rate.
Additional Information
- Basel Committee:
- Basel accords refer to the Banking supervision accords issued by the Basel Committee on banking supervision.
- The Basel Committee on banking supervision is a global standard committee for the regulation of banks.
- It was established by the central bank governors of 10 countries in 1974.
- Its objective is to improve the quality of banking supervision worldwide.
- The headquarters is in Basel, a city in Switzerland.
- Basel Norms:
- Basel norms are the international banking regulations to strengthen the international banking system.
- It is in the form of an agreement by the Basel Committee of Banking supervision which mainly focuses on the risk to banks and the financial system.
Important Points
- Basel-I norms:
- Basel, I was introduced in 1988 and focused on credit risk.
- India adopted Basel 1 guidelines in 1999 as it defines the capital and structure of risk weights for banks.
- The minimum Capital requirement was fixed at 8% of risk-weighted assets.
- Basel-II norms:
- Basel II norms were established in 2000 and were based on three parameters capital adequacy requirement, supervisory requirement, and market discipline.
- A minimum capital adequacy requirement of 8% of risk-weighted assets was fixed.
In case you still have your doubts, contact us on 9811333901.
For UPSC Prelims Resources, Click here
For Daily Updates and Study Material:
Join our Telegram Channel – Edukemy for IAS
- 1. Learn through Videos – here
- 2. Be Exam Ready by Practicing Daily MCQs – here
- 3. Daily Newsletter – Get all your Current Affairs Covered – here
- 4. Mains Answer Writing Practice – here
- Visit our YouTube Channel – here
