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    Question

    Which of the following is NOT an objective of Basel III

    guidelines?┬а A.┬а┬а┬а Improve risk management and governance in banks B.┬а┬а┬а Improve the ability of banking sector to absorb financial and economic shocks C.┬а┬а Sharing information of willful defaulters D.┬а┬а Improve transparency and disclosures
    A Only A Correct Answer Incorrect Answer
    B Only C Correct Answer Incorrect Answer
    C A and B Correct Answer Incorrect Answer
    D C and D Correct Answer Incorrect Answer
    E All are objectives of BASEL III Correct Answer Incorrect Answer

    Solution

    Basel III is a set of international banking regulations developed by the Bank for International Settlements, in order to promote stability in the international financial system. The purpose of Basel III is to reduce the ability of banks to damage the economy by taking on excess risk. The objectives include: ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Improve the banking sectorтАЩs ability to absorb shocks arising from financial and economic stress. ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Improve risk management and governance ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Strengthen banksтАЩ transparency and disclosures These objectives are achieved through its 3 pillars: ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Pillar 1: Minimum Regulatory Capital Requirements based on Risk Weighted Assets (RWAs): Maintaining capital calculated through credit, market and operational risk areas. ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Pillar 2: Supervisory Review Process: Regulating tools and frameworks for dealing with peripheral risks that banks face. ┬╖┬а┬а┬а┬а┬а┬а┬а┬а Pillar 3: Market Discipline: Increasing the disclosures that banks must provide to increase the transparency of banks.

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