BCBS has finalized the first version of the consolidated Basel framework and set out changes to the draft framework, along with the additional frequently asked questions (FAQs) since the publication of the draft consolidated framework in April 2019. The framework brings together all of the global standards of the Basel Committee for the regulation and supervision of banks.
The consolidated framework, which is available in a modular format, comprises 14 "standards," setting out requirements on specific topics, each of which is further divided into "chapters":
- Scope and definitions module, which describes the scope of application of the Basel Framework
- Module on Definition of capital, which describes the criteria that bank capital instruments must meet to be eligible to satisfy the Basel capital requirements as well as necessary regulatory adjustments and transitional arrangements
- Risk-based capital requirements module, which describes the framework for risk-based capital requirements
- Module on Calculation of RWA for credit risk, which describes how to calculate capital requirements for credit risk
- Module on Calculation of RWA for market risk, which describes how to calculate capital requirements for market risk and credit valuation adjustment risk
- Module on Calculation of RWA for operational risk, which describes how to calculate capital requirements for operational risk.
- Leverage ratio module, which the simple, transparent, non-risk-based leverage ratio
- Liquidity Coverage Ratio module, which is a measure that promotes the short-term resilience of a bank's liquidity risk profile
- Net Stable Funding Ratio module, which requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities
- Large exposures module, which requires banks to measure their exposures to a single counterparty or a group of connected counterparties and limit the size of large exposures in relation to their capital
- Margin requirements module, which establishes minimum standards for margin requirements for non-centrally cleared derivatives
- Pillar 2 supervisory review process module, which ensures that banks have adequate capital and liquidity to support all the risks in their business, especially with respect to risks not fully captured by the Pillar 1 process, and encourages good risk management.
- Disclosure requirements module, which aim to encourage market discipline
- Module on Basel Core Principles for Effective Banking Supervision, which provide a comprehensive standard for establishing a sound foundation for the regulation, supervision, governance, and risk management of the banking sector
Keywords: International, Banking, Basel III, Consolidated Basel Framework, BCP, Pillar 1, Pillar 2, Pillar 3, BCBS
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