Compliance, Legislative & Regulatory Standards

Regulatory Environment - Part 2



This tutorial describes the concept of capital adequacy and how the Basel requirements about this have progressed from the simplicity of the original Basel capital accord (Basel I) in 1988 to the more sophisticated requirements of Basel II and Basel 2.5. We discuss the minimum capital requirements set out in Pillar 1, supervisory review process in Pillar 2, and the disclosure requirements mandated in Pillar 3. This tutorial explains in detail how Basel III changes the nature of previous capital adequacy regimes. It also examines other areas addressed by Basel III, such as liquidity standards and leverage rules.


On completion of this tutorial, you will be able to:
- Explain the difference between solvency and liquidity
- Outline the evolution of regulatory capital requirements from the 1988 Basel Capital Accord (Basel I) to the "three pillars" approach of Basel II and the subsequent amendments made under Basel 2.5
- Describe the minimum capital requirements as set out in Pillar 1
- Explain the purpose of the supervisory review process as set forth in Pillar 2
- Outline the disclosure requirements mandated by Pillar 3
- Explain some of the reasons why major changes to the Basel II requirements were deemed to be necessary
- Describe the most important changes set out by Basel III
- Outline some of the key implementation issues about Basel III


Module 1: Basel II & Basel 2.5
Topic 1: Evolution of Basel II
Topic 2: Pillar 2 (Minimum Capital Requirements)
Topic 3: Pillar 2 (Supervisory Review)
Topic 4: Pillar 3 (Market Discipline)

Module 2: Basel III - An Introduction
Topic 1: The Need for Basel III
Topic 2: Key Components of Basel III
Topic 3: Implementation of Basel III


SFC:2.00, PWMA:2.00