Basel III and Basel II
What are the Basel III and Basel II Regulatory Frameworks?
Basel III is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision. The third installment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. In Basel III, a more formal scenario analysis is applied.
Basel II is the second of the Basel Accords, (now extended and effectively superseded by Basel III), which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. Basel II, published in June 2004, was intended to create an international standard for banking regulators to control how much capital banks need to put aside to guard against the types of financial and operational risks banks face.
Who is Impacted by the Basel III and Basel II Accords?
All financial institutions, but the impact may differ by jurisdiction, types and size. Global Systemic Important Banks (G-SIBs) will be subject to higher core tier 1 capital requirements. There are currently 29 G-SIBs.
How Can Experian Help my Business With Basel III and II Compliance?
Experian can review and assess the bank’s portfolio(s) and provide a gap analysis and project design that meets Basel III requirements, followed by data prep, development, integration, and validation of loss projections using the following models:
- Probability of Default (PD)
- Loss Given Default (LGD)
- Exposure at Default (EAD)
Additionally, evaluate strategic initiatives to help offset the potential impact by optimizing risk-weighted assets (RWA) strategies and capital usage.
Stress Testing and Capital Assessment
Experian understands the importance of measuring capital adequacy, stress testing and loss reserve estimation reporting and brings an extensive background in modeling, banking, risk management and simulation to our clients. Click the button below to learn more about our stress testing and captial assessment services and analytics.