基于巴塞尔协议III的金融风险管理外文翻译资料

Financial risk management based on Basel III

Lei Lei1, Yuan Yue2, *

1Southampton Business School, University of Southampton, Southampton, UK

2Adam Smith Business School, University of Glasgow, Glasgow, UK

*Corresponding author: yy980925@outlook.com

Keywords: Basel III, Bank, Capital Buffer, Countercyclical Capital

Abstract: The objective of this paper to providing critical ensuring effective financial risk management and working as a safeguard to protect the entire financial system. Many scholars hold the view that the purpose of introducing Basel III regulations is to promote the establishment of capital buffer, which will help overcome the financial pressure that the global financial system may encounter. In addition, the improvement of Basel III appears in the form of counter cyclical capital, and its buffer capacity is higher than the minimum capital requirement; In turn, this may help significantly reduce the systemic risk that banks could have seen.

1. Introduction

Basel is a set of voluntary global regulatory standards that have been created and implemented at the global level with the objective of strengthen the banking sector as it helped in the better management of risk exposure [1]. Although efforts in this regard were underway since the late 1940s, a crucial development in this regard has been witnessed through the development of Basel regulations. Essentially, the Basel regulations use the capital to manage the risk exposure of financial service providers, and thus necessary safeguard need to be in place to ensure the smooth functioning of the entire financial system. The Basil committee of lsquo;Banking Supervisionrsquo; was formed in 1974 after the break down of Bretton wood System, and the members include representatives of 27 countries that meet four times a year to evaluate the existing regulation and further improvement [2]. The committee was originally represented by the central banks from 10 different countries. Since the formation of the Basel Committee, it has been working as the main forum for regular chalking out and implementing best practices regarding supervisory matters [3].

Basel regulations are implementing the capital emphasising on financial service of organisations that has been agreed at the global level. Basel has created three major accords that are known as Basel I, Basel II, and Basel III [4]. The first Basel regulations were agreed in 1988, various amendments and improvements have been made to the regulations since the first draft. The regulations were mainly regarding credit risk management as the capital accord was made in Basel I [5]. The Basel II framework was developed in 2004, where improvements to Basel I have been made. The Basel II accord was mainly regarding capital requirements, risk management, and disclosure of central banks [6]. However, since the regulations had various weaknesses that led to the unfortunate 2007/08 Global Financial Crisis, further improvements in the Basel have been made in the form of Basel III in 2010.

However, the regulations have been actually implemented in 2013. Currently, all banks around the world have to comply with the Basel III regulations [7].

As the default of a financial service provider like a commercial bank could pose significant risks to the stability of the entire financial system, the need for regulations has been felt for a long [8]. By realizing the significance of Basel regulations, this report has been organized with the objective of providing critical ensuring effective financial risk management and work as a safeguard to protect the entire financial system.

2. Basel III Development

The Basel Committee was set up in1974; but the first accord was introduced in 1988, which published a set of capital requirements that was termed as “Basel I”. The main focus of the regulations was to manage credit risk as it group and classified bank assets using the credit risk [9]. The risk level of banks could vary within the range of 0% to 100% and classified under one of the five categories of risks, which were 0%, 10%, 20%, 50% and 100% depending on the complexities that the organisation encounter and the risk of the securities held by the organisation [10]. However, there were certain weaknesses that gave banks the opportunity to control the amount of capital they required even though the regulations were designed by professionals [11]. In addition, there were no regulations concerning on bank risk-taking as banks were able to acquire capital more than the minimum requirements [7]. This led to the development of new regulations that were labeled as lsquo;Basel IIrsquo; that take into force in 2004. However, the regulations still had loopholes that banks exploited, and that led to the ultimate 2007/08 Global Financial Crisis [5]. The loopholes were identified and eradicated subsequently through a new set of regulations that were termed as lsquo;Basel IIrsquo;. Currently, Basel III regulations are followed around the world [12].

The analysis of Basel II regulations could reveal that the major issues with the regulations were the use of a single global risk factor [13]. An entity operating in different locations could be confronting to different risks that are counterbalanced if a single global risk factor

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