Basel Norms ( Basel 1 / Basel 2 / Basel 3 ) Masterclass

Trace the origins of Basel norms from the BIS's founding after the great depression to the Basel accords (I, II, III) under the BCBS, emphasizing capital adequacy.

Explore why Basel 1 accords emerged to address credit risk and capital adequacy, defining capital and risk weights to curb high-risk lending and window dressing in banking reports.

Explore Basel 1 treatment of bank capital, distinguishing Tier 1 core capital from Tier 2 supplementary capital, and examine paid up capital, reserves, and revaluation reserves.

Explore Basel 1 risk weighted assets (RWA) and how assets earn different risk weights, from cash (0%) to corporate debt (100%), with practical examples calculating total RWA.

Learn how Basel 1 defines capital adequacy ratio, calculated as tier one plus tier two capital divided by risk-weighted assets, using RBI weights.

Basel 1 raised the capital adequacy ratio to 8%, offered a simple fixed-weight framework, and achieved worldwide adoption, but neglected market, operational, and liquidity risks and used book values.

Explore how the Barings bank collapse from unauthorized derivatives trading exposed market risk and prompted the BCBS to add market risk to Basel I in 1996.

Basel II expands Basel I by adding credit, market, and operational risk to capital adequacy, aiming to raise risk-sensitive capital and improve internal risk assessment.

Explore Basel 2 structure with three pillars: minimum capital requirements, supervisory review, and market discipline, covering credit risk, market risk, and operational risk, and emphasize capital adequacy through disclosure.

Learn how Basel II refines capital classification by detailing Tier 1 and Tier 2 components, including paid up capital, reserves, hybrid instruments, and subordinated debt, with India’s 2016 updates.

Explore Basel 2 capital adequacy concepts, including CAR, CRAR, and the breakdown of risk weighted assets into credit, market, and operational risks, illustrated with ICICI Bank case study.

Explore Basel II's operational risk framework and the basic indicator approach (BIA), calculating capital as 15% of average three-year gross income, with real-case examples.

Apply the basic indicator approach to Bank of India's operational risk using three-year gross income data (2018–2020) and compute the capital charge, including the 2020 figure of 2,826 crores.

Explore standardized operational risk capital under Basel III, using eight business lines with beta factors to compute KTSA, including negative-charge offsets, and contrast with the basic indicator approach.

Explore Basel norms for calculating market risk capital charge, covering interest rate, equity, foreign exchange and gold risk, with a Bank of New Delhi case study and capital components.

Explore the standardized approach to credit risk under Basel norms, learning how to calculate risk-weighted assets, capital charge, and case-study computations for CRAR.

Basel 3, released in 2010 after the 2008 crisis, introduces a regulatory regime for capital, liquidity, leverage, and funding, addressing the Lehman Brothers collapse and Basel 2 lessons.

Explore how Basel 3 enhances Basel 2 pillars, introducing CET1 and AT1, capital buffers CCB and CCCB, a leverage ratio, and liquidity metrics LCR and NSFR.

Basel 3 strengthens capital quality and quantity, defines tier 1 and tier 2, and sets stricter minimums: CET1 4.5% (5.5% in india), total tier 1 6% (7%), total 8% (9%).

Explore how Basel 3 introduces capital buffers to conserve capital and maintain liquidity prior to dividend distributions, including the capital conservation buffer and countercyclical capital buffer.

Basel 3 introduces the capital conservation buffer (CCB), a 2.5% of total risk-weighted assets requirement met with CET1 capital, with solo and consolidated applications and distribution constraints.

Master Basel 3 norms and the countercyclical capital buffer. Apply CET1, CAR, and RWAs concepts through Punjab City Urban Bank and HDFC Bank case studies.

Understand Basel 3 leverage ratio, defined as capital measure divided by exposure measure, using on-balance and off-balance sheet exposures and RWAs, illustrated by a Union Bank of India case study.

Basel 3 introduces liquidity risk management with the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) to ensure short-term stability under a 30-day stress and long-term funding stability.

Explore the liquidity coverage ratio (LCR) under Basel 3 by analyzing high-quality liquid assets (HQLA) and net cash outflows through practical case studies of Bank of India.

Explore the net stable funding ratio (NSFR) and liquidity coverage ratio (LCR) under Basel 3, including ASF and RSF calculations, factors, and practical case studies.

Learn how the large exposure framework (LEF) defines 10% of tier one capital and 20–25% single counterparty limits, and 25% group limits, guiding concentration risk and capital planning.

Explain the bank's balance sheet, detailing assets, liabilities, and net worth, and illustrate with a practical case study on regulatory concepts like CRR and SLR, deposits, and contingents.

Analyze the bank's profit and loss statement format, covering schedules 13–16 (income, other income, interest expended, operating expenses, provisions), and compute net profit and statutory reserve transfers.