Risk-Based Supervision in India: Features of an Effective bank Supervisory Framework
Risk-Based Supervision (RBS) in India represents a shift from checklist-style inspections to a forward-looking, risk‑centred, and proportionate supervisory regime that prioritizes the most material risks to safety, soundness, and systemic stability. Background RBS emerged globally after the global financial crisis exposed the limits of compliance-heavy and backward‑looking inspections, pushing supervisors to focus on inherent risks,…
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Basel III Buffers, Leverage and Liquidity: A Comprehensive Guide to Resilience
Basel III strengthens bank resilience through complementary safeguards: risk-based capital with usable buffers, a simple non‑risk‑based leverage backstop, and liquidity standards that protect short‑term and structural funding positions across cycles and systemic stress. General Basel III introduced higher‑quality capital, explicit buffers, a leverage ratio, and two liquidity ratios to remedy weaknesses revealed in the global…
Read article Pillar 3 Market Discipline: Practical Guidance for Robust, Decision‑Useful Disclosure
Market discipline under Pillar 3 complements minimum capital (Pillar 1) and supervisory review (Pillar 2) by enabling informed market scrutiny through clear, consistent, and comparable disclosures that incentivize prudent risk‑taking and sound governance. It strengthens external accountability by giving investors, creditors, analysts, and counterparties the information needed to monitor risk profiles and influence behavior through…
Read article Building a Robust ICAAP Stress Testing Program: Objectives, Methods, and the PCA Link
Stress testing within ICAAP is a forward‑looking, governance‑anchored discipline that evaluates a bank’s resilience under adverse yet plausible conditions and informs capital planning, risk appetite, and early corrective actions aligned with supervisory expectations under Pillar 2 and the PCA framework. Role and objective Stress testing in ICAAP assesses whether internal capital and liquidity are adequate…
Read article Supervisory Review Process and ICAAP under Basel’s Pillar 2
The Supervisory Review Process (SREP) and the Internal Capital Adequacy Assessment Process (ICAAP) together ensure that banks maintain capital commensurate with their risk profile and operate above minimums using forward‑looking, proportionate, and well‑governed processes, with supervisors empowered to review, challenge, and intervene early where needed. Objective of Pillar 2 Pillar 2 aims to ensure banks…
Capital Charge for Operational Risk: From Legacy Approaches to the New Standardized Paradigm
Operational risk capital ensures that banks can absorb losses arising from process failures, people, systems, or external events, with Basel’s current framework centering on a standardized, data-driven approach anchored in business indicators and internal loss experience. This article outlines definitions, methodologies, legacy approaches (BIA/SA/AMA), key shortcomings, and the new standardized approach with business indicators, risk-weighted…
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