Basel Norms

Banking · बेसल मानदंड · 11 facts

Basel Norms issued by BCBS (Basel Committee on Banking Supervision)

BCBS is part of BIS (Bank for International Settlements), HQ: Basel, Switzerland

Basel I (1988): minimum capital requirement of 8% (CRAR)

Basel II (2004): 3 pillars — capital adequacy, supervisory review, market discipline

Basel III (2010): introduced after 2008 global financial crisis

Basel III added Liquidity Coverage Ratio (LCR) and leverage ratio requirements

India CRAR requirement: 9% (higher than Basel minimum of 8%)

CRAR = Capital to Risk-weighted Assets Ratio (Capital Adequacy Ratio)

Tier 1 Capital: core capital (equity + disclosed reserves) — highest quality

Tier 2 Capital: supplementary capital (undisclosed reserves, subordinated debt)

Basel norms ensure banks have enough capital to absorb unexpected losses