Basel II

The Centre for Planning and Economic Research (KEPE) was established as a research unit, under the title “Centre of Economic Research”, in 1959. Its primary aims were the scientific study of the problems of the Greek economy, the encouragement of economic research ...

Credit risk analysis is an important topic in the financial risk management. Due to recent financial crises and regulatory concern of Basel II, credit risk analysis has been the major focus of financial and banking industry. An accurate estimation of credit risk could be transformed into a more efficient use of economic capital. In this study, we try to use a triple-phase neural network ensemble technique to design a credit risk evaluation system to discriminate good creditors from bad ones. In this model, many diverse neural network models are first created. Then an uncorrelation maximization algorithm is used to select the appropriate ensemble members. Finally, a reliability-based method is used for neural network ensemble. For further illustration, a publicly credit dataset is used to test the effectiveness of the proposed neural ensemble model.

In banking sector risk management is a key issue connected to the financial system stability.
Banking activities is becoming more complex, compounded by exploding technological capabilities, expanding product offerings and deregulation of competition. In other words, banking is a business of risk. For this reason, efficient risk management is extremely required. In this connection, banks have been moving towards the use of sophisticated models for measuring and managing risks. The Indian banking system is better prepared to adopt Basel II than it was for Basel I due to better risk awareness. The Basel II Accord had led the banks to new prudential norms like capital adequacy and identification of bad debts. Recently many banks have appointed senior managers to oversee a formal risk management function. The effective risk management lies with the ability to gauge the risks and to take appropriate measures. In the light of this, an analysis was carried out to highlight the NPAs position of Public and Private Sector Banks in India. The trend of NPAs in public and private sector banks in the last nineteen years shows that the level of NPAs in relation to the total assets has declined. The extent of NPA is comparatively higher in public sector banks compare to the private sector and foreign banks. The study also focuses on the risk management practices of Public and Private Sector Banks after the implementation of Basel II with the help of capital adequacy ratio for a period of 2007 to 2012. Hence an efficient risk management system is
needed.

Micro, small and medium enterprises (MSMEs) are declared very capable of playing a crucial role for a region, specifically as one of the drivers of regional economic growth. Micro, small and medium enterprises (MSMEs) are defined as a means to introduce regional creative products and provide business opportunities for enterprise actors in the regions. In addition, the role of micro, small and medium enterprises (MSMEs) actors is considered very vital in order to increase per capita income and improve the economy of a region. Consequently, micro, small and medium enterprises (MSMEs) are required to actively participate in developing the country’s economy. The results of the study showed that 90.1% of MSMEs provided significant effects on the rate of economic growth.

Credit risk concentration is one of the leading topics in modern finance, as the bank regulation has made increasing use of external and internal credit ratings. Concentration risk in credit portfolios comes into being through an uneven distribution of bank loans to individual borrowers (single-name concentration) or in a hierarchical dimension such as in industry and services sectors and geographical regions (sectorial concentration).To measure single-name concentration risk the literature proposes specific concentration indexes such as the Herfindahl–Hirschman index, the Gini index or more general approaches to calculate the appropriate economic capital needed to cover the risk arising from the potential default of large borrowers.However, in our opinion, the Gini index and the Herfindahl–Hirschman index can be improved taking into account methodological and theoretical issues which are explained in this paper.We propose a new index to measure single-name credit concentration risk and we prove the properties of our contribution.Furthermore, considering the guidelines of Basel II, we describe how our index works on real financial data. Finally, we compare our index with the common procedures proposed in the literature on the basis of simulated and real data.

يعتبر موضوع كفاية رأس المال المصرفي و اتجاه البنوك إلى تدعيم مراكزها المالية ، أحد الاتجاهات الحديثة في إدارة البنوك ، و في إطار سعي الجهاز المصرفي في معظم دول العالم إلى تطوير القدرات التنافسية في مجال المعاملات المالية ، و في ظل التطورات المتلاحقة التي تشهدها الأسواق العالمية ، و مع تزايد المنافسة المحلية و العالمية أصبح أي بنك عرضة للعديد من المخاطر التي قد تنشا من العوامل الداخلية التي يعمل فيها البنك و على وجه الخصوص البيئة العالمية ،و في ظل تصاعد المخاطر المصرفية ،بدا التفكير في البحث عن آليات لمواجهة تلك المخاطر التي تتعرض لها البنوك ، وفي أول خطوة في هذا الاتجاه تشكلت و تأسست لجنة بازل للرقابة المصرفية.

و لتسليط الضوء على هذا الموضوع و معالجة مختلف جوانبه صغنا الإشكالية التالية:

-ما هي لجنة بازل للرقابة المصرفية و ما هي المعايير التي اعتمدتها هذه اللجنة و ما مدى تطبيق هذه المعايير في النظام المصرفي الجزائري ؟

و يندرج ضمن هذا التساؤل مجموعة من الأسئلة الفرعية التي سنحاول الإجابة عليها من خلال هذا البحث .

- ماهي لجنة بازل للرقابة المصرفية؟
- ما هي الجوانب الأساسية لهذه الجنة ؟
- ما هي المعايير الرقابية التي اعتمدتها هذه اللجنة ؟
- ما هي أهداف هذه اللجنة ؟
- ما هي إيجابياتها و سلبياتها ؟
- ما مدى تطبيق هذه المعايير في النظام المصرفي الجزائري ؟

و علي هذا الأساس قسمنا بحثنا إلى ثلاث مباحث

Both Andreas Libavius and Heinrich Khunrath graduated from Basel Medical Academy in 1588, though the theses they defended reveal antithetical approaches to medicine, despite their shared interests in iatrochemistry and transmutational alchemy. Libavius argued in favour of Galenic allopathy while Khunrath promoted the contrasting homeopathic approach of Paracelsus and the utility of the occult doctrine of Signatures for medical purposes. This article considers these differences in the two graduates' theses, both as intimations of their subsequent divergent notions of the boundaries of alchemy and its relations with medicine and magic, and also as evidence of the surprisingly unstable academic status of Paracelsian philosophy in Basel, its main publishing centre, at the end of the sixteenth century.

The study aims to ascertain the effect of risks on the profit efficiency of Ghanaian banks. Ratio analysis is used to measure risk while the mean of ratios is used to test the returns to scale property of the industry. The non-parametric data envelopment analysis profit efficiency scores are estimated using the ratio of cost and revenue approach and using the bootstrapped truncated regression the nexus is ascertained. Data from 2000-2015 of 32 Ghanaian banks was used. The study found significant impacts on profit efficiency, negative and positive for liquidity risk and market risk respectively. Credit risk, insolvency risk, and operational risk have a negative and insignificant impact on profit efficiency and capital risk, positive and insignificant. In the absence of insolvency risk, capital risk has a negative impact and in the absence of regulation, operational risk has a positive impact all of which are insignificant. A pooled industry data exhibited a variance returns to scale property. There is comparatively high-profit efficiency at 68% calculated based on each year’s returns to scale over the study period which shows the closeness of the banks to the benchmark efficiency frontier. Regulation and diversification respectively have a negative and positive impact while intermediation, return on asset and concentration in the absence of size, has a positive and significant impact on profit efficiency. This paper is the first risk-efficiency study of its kind that investigates the nexus between various risk types with profit efficiency. It has also covered all key risk types specified in the Basel Accord (credit, liquidity, market and operational risk) and this will provide relevant knowledge to the government, regulatory supervisory bodies, policy makers, practitioners as well as academics. Theories have also been aligned to the study of risk profit efficiency nexus.

Risk management plays an important role in ensuring the safety and survival of banking institutions. Basel II Accord is an international regulatory attempt aimed at strengthening the risk management practices in the internationally active banks. The Basel II Accord is the framework developed in 1999 by the Central Banks of G10 countries to regulate the risk management process in large internationally active banks in their domains and in the Organization for Economic Cooperation and Development (OECD) member countries. The framework was issued principally to address the issue of the minimum capital requirements that have to be kept aside by banks, to be able to face any economic stress, and for protecting the international financial system from financial crises that could lead to the collapse of banks. This research examines the impact and challenges of Basel II on the risk management practices in Nigerian banks, and the extent of progress the banks have made in implementing the Accord within the milieu of the Central Bank of Nigeria’s guidelines. The sample population comprised all the banking institutions in Nigeria, including commercial banks, mortgage banks, finance houses and merchant banks. A random sample of 15 commercial banks was taken from which sampling units of 60 respondents with risk and control functions were purposively selected from each of the sampled banks. What informed the choice of the commercial banks as the sample source was because the Central Bank of Nigeria appeared to have considered the commercial banks as the centre focus of Basel II implementation for a start. Four hypotheses were formulated to validate the observations that necessitated the study. All the hypotheses were tested at 0.05 level of significance using the ANOVA, regression and t-test models. The following findings were made from the study after testing the hypotheses formulated for the study: All the Nigerian banks face almost the same sets of challenges in implementing Basel II requirements; the Basel II Accord caused significant change in capital measurement and allocation; the Accord has improved the risk management practices in Nigerian banks, and Nigerian banks have made some progress in Basel II implementation project. At the end of the research, it was recommended that the Central Bank of Nigeria increase the level of awareness on Basel Accord; that the CBN should immediately enforce the Basel II regulations on all operators in the banking industry rather than focusing on commercial banks; that the banks should enlighten their Boards and senior management staff on the implications of Basel Accord on the banks’ businesses, and  finally that the banks should find smarter ways to raise further capital in response to Basel II requirement.

Modeling and estimating loss given default (LGD) is necessary for banks that apply for the internal ratings based approach for retail portfolios. To validate LGD estimations, there are only a few approaches discussed in the literature. In this paper, two models for validating relative LGD and absolute losses are developed. The validation of relative LGD is important for risk-adjusted credit pricing and interest rate calculations. The validation of absolute losses is important to meet the capital requirements of Basel II. Both models are tested with real data from a bank. Estimations are tested for robustness with in-sample and out-of-sample tests.

The intensity of recent turbulence in financial markets has surprised nearly everyone. This paper searches out the root causes of the crisis, distinguishing them from scapegoating explanations that have been used in policy circles to divert attention from the underlying breakdown of incentives. Incentive conflicts explain how securitization went wrong, why credit ratings proved so inaccurate, and why it is

The Basel Committee released in April 2016 its new directive d368 Interest Rate Risk in the Banking Book (IRRBB). This directive finally replaces the former text of July 2004 which was no more adapted from a methodological point of view but which was rich in recommendations and already included the fundamental principles to follow for managing interest rate risk in the banking book. Indeed, the new text does not appear as a break away from but rather as a continuation on an area that was neglected during the crisis. Where the text is revolutionary is that the regulator moved significantly away from a position of general but often vague principles to a much more demanding quality of management and modeling of IRRBB. Indeed, this text appears fundamental and raises the bar at the highest technical level, requiring banks to improve their methodologies, their expertise and to review their setup in a very short period of time. It also reassesses the responsibility of the management, a repeating leitmotiv since the crisis which should lead inevitably to the granting of licensing for executive officers of banks in the EU (and their removal in case of resolution). The text is complex, dense and still includes some grey areas. It is based on the latest improvements made in ALM, it requires to value almost “marked to model” the full balance sheet and it definitely deserves comments.

CENGİZ,Efsane, Basel I-II-III Capital Accord, Thesis of Master Degree, Ankara, 2013

In 1988, the Basel Committee, issued the Basel I Accord, in order to strengthen the structure of the banks .This consensus of the world's banking system, has been the first step for the stability of the financial markets, to a single audit approach with the standard criteria. Basel I regulations,  tries to establish a relationship based on the principle of risk on assets  and the risks that banks operating in the international arena.

In later years, the Basel I Accord has been subject to intense criticism that not only due to capital adequacy, inadequate opinion of a systems approach. As a result of these criticisms, the need for a new consensus has emerged.. Basel II was published in 2004, and banks to develop effective risk management and market discipline, enhance the efficiency of capital adequacy measures, thereby creating a solid and efficient banking system and the aim of ensuring financial stability

In 2008, after the financial crisis affecting the world-wide financial system both very costly and troublesome, the Basel Committee, has taken steps to design a new frame, to go through the banking and financial system in a way, which has resistant to crises, to stand face in the future, capital standards for higher compensation, including a detailed liquidity risk and systemic risk. On December 16, 2010, the Basel Committee published the Basel III rules.The most important issue with Basel III  has been the implementation of “the capital buffer" and " the capital conservation buffer" applications. From this perspective brings forth a need for additional capital due to Basel III, banks' equity capital provisions for a period thought to negatively affect the measures referred to in the medium term, therefore, it is expected to contribute positively to economic growth. If we evaluate the impact and consequences of Basel III from the perspective of the Turkish business world, would not be of great importance for Turkey debate on capital adequacy, but liquidity and leverage ratios can say that ,on some of the issues , could be dangerous.

Keywords:
1. Basel I
2. Basel II
3. Basel III
4. Banks’ Risk Measurement Methods
5. Basel Criteria

In 1988, an agreement was reached in Basel to set the common requirements of bank capital towards promoting the soundness and stability of the international banking system. Banks are required to hold capital in proportion to their perceived credit risks. In
June 2006 Basel Committee on Banking Supervision issued a comprehensive document on New Capital Adequacy Framework to replace the 1988 Basel Accord and to foster a strong emphasis on risk management and to encourage ongoing improvements in banks’ risk assessment capabilities. The paper examines the potential impact of Basel II on the banking sector of Bangladesh. A survey is conducted to find out the present status of the implementation of Basel II and their possible impact and reaction of the banking community. The result shows that the banking sector of Bangladesh is taking necessary steps to comply with Basel II requirement under the guidelines of Bangladesh Bank. The capital requirement under Basel II regime increased due to additional burden of capital from Market Risk and Operational Risk. There are many possible negative impacts of an unchecked implementation of Basel II. However, Basel II is here to stay and the competitive forces will compel banks to follow the example. The option here is to decide what form of the Basel II norms should be applied and to what extent to ensure the survival and growth for the developing economies. Ultimately, the norms are for strengthening the banking systems globally and this objective should not be lost. Bangladesh Economies need to be prepared and to adapt to the changing global conditions and to adapt the norms to their own advantage.