Basel III
- The Basel III Guidelines are based upon 3 very important aspects which are called 3 pillars of the Basel II. These 3 pillars are as follows:
- Minimum Capital Requirement
- The first pillar Minimum Capital Requirement has been discussed above. This mainly for total risk including the credit risk, market risk as well as Operational Risk .
- Supervisory review Process
- Basically intended to ensure that the banks have adequate capital to support all the risks associated in their businesses.
- In India , the RBI has issued the guidelines to the banks that they should have an internal supervisory process which is called ICAAP or Internal Capital Adequacy Assessment Process
- Apart from that, there is another process stipulated by RBI which is actually the Independent assessment of the ICAAP of the Banks. This is called SREP or Supervisory Review and Evaluation Process.
- Market Discipline
- The idea of the third pillar is to complement the first and second pillar. This is basically a discipline followed by the bank such as disclosing its capital structure, tier-I and Tier –II Capital and approaches to assess the capital adequacy.
