Basel II is an international banking regulation framework established by the Basel Committee on Banking Supervision, aimed at enhancing the stability of the financial system by improving risk management and capital adequacy standards for banks. It introduced a three-pillar approach focusing on minimum capital requirements, supervisory review, and market discipline to ensure that banks hold sufficient capital to cover their risks.

Basel II

international banking regulation framework

Basel Committee on Banking Supervision

Financial System Stability

Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. It is essential for ensuring that an organization can achieve its objectives while safeguarding its assets and reputation against potential threats.

risk management

capital adequacy standards

Minimum capital requirements are regulatory standards set by financial authorities to ensure that banks and financial institutions maintain a certain level of capital reserves to absorb potential losses and reduce the risk of insolvency. These requirements aim to promote stability and confidence in the financial system by ensuring that institutions have enough capital to cover their risk exposures.

minimum capital requirements

supervisory review

market discipline

Banks are financial institutions that accept deposits from the public, create credit, and provide loans, playing a crucial role in the economy by facilitating financial transactions and influencing monetary policy. They operate under strict regulations to ensure stability and protect consumers, while also driving economic growth by allocating capital efficiently.

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