BASEL IIIBy Vict

or

Setiawan Kath

y Ji

Mary Mao

• RECAP: HISTORY OF BASEL ?

• WHAT IS BASEL III ?

• WHAT’S NEW IN BASEL III ?

• IMPLEMENTATION BY

APRA

HISTORY OF BASEL ?

RECAP:

WHAT IS BASEL III ?

BASEL 3.0: BUFFER THAN EVER

BEFORE

WHAT’S NEW IN BASEL III ?

CAPITAL

LIQUIDITY

CAPITAL Minimum Capital Requirements

Non-allowable Capital

New Capital Buffers

Leverage Ratio

CAPITAL Minimum Capital Requirements

Non-allowable Capital

New Capital Buffers

Leverage Ratio

INCREASED CAPITAL REQUIREMENTS

CAPITAL Minimum Capital Requirements

Non-allowable Capital

New Capital Buffers

Leverage Ratio

CAPITAL Minimum Capital Requirements

Non-allowable Capital

New Capital Buffers

Leverage Ratio

CAPITAL BUFFERS

BASEL II vs. BASEL III

CAPITAL Minimum Capital Requirements

Non-allowable Capital

New Capital Buffers

Leverage Ratio

LEVERAGE

LIQUIDITY Liquidity Coverage Ratio (LCR)

Net Stable Funding Ratio (NSFR)

Liquidity Risk

LIQUIDITY Liquidity Coverage Ratio (LCR)

Net Stable Funding Ratio (NSFR)

Liquidity Risk

LIQUIDITY COVERAGE RATIO

LIQUIDITY Liquidity Coverage Ratio (LCR)

Net Stable Funding Ratio (NSFR)

Liquidity Risk

NET STABLE FUNDING RATIO

LIQUIDITY TIMELINE

LIQUIDITY Liquidity Coverage Ratio (LCR)

Net Stable Funding Ratio (NSFR)

Liquidity Risk

Fundamental Principle for Management & Supervision of

Liquidity RiskA bank should:

Be responsible for the sound management of liquidity risk

Establish a robust liquidity risk management framework

Assess the adequacy of both a bank's liquidity risk management framework and its liquidity position

Take prompt action if a bank is deficient

Protect depositors and to limit potential damage to the financial system.

IMPLEMENTATION BY APRA

Allows for the capital conservation buffer to be phased-in from 1 January 2016 and become fully effective on 1 January 2019

Capital conservation buffer implemented in full from 1 January 2016

TRANSITION OF LCR AND NSFR

Phase-in:1 January 2015 -> LCR requirement of 60%

+ 10% each year to reach 100 per cent on 1 January 2019.

APRA is not proposing to adopt this phase-in

arrangement for the LCR.

NSFR does not come into effect until 1 January 2018

EXPECTED IMPACT ON ECONOMY

Financial markets0 Steeper yield curves 0 Lower yields for instruments qualifying as a part of the liquidity buffer

0 LCR used to fund government budget deficits post GFC.

The new liquidity rules are likely to 0 increase interest rates and 0 reduce available liquidity

Thus putting pressure on interest margins