{"id":40361,"date":"2024-04-05T06:12:17","date_gmt":"2024-04-05T00:42:17","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=40361"},"modified":"2025-04-25T01:48:28","modified_gmt":"2025-04-24T20:18:28","slug":"basel-iii-endgame","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/basel-iii-endgame\/","title":{"rendered":"What is Basel III Endgame?"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is Basel III and \u2018Basel III Endgame\u2019?<\/li>\n<li>The \u201cEndgame\u201d Proposal of the US<\/li>\n<li>Why are Banks Upset with the \u201cEndgame\u201d Proposal of the US?<\/li>\n<li>Decision to Make Major Changes in the \u201cEndgame\u201d Proposal<\/li>\n<\/ul>\n<h2>Why in News?<\/h2>\n<p>In a victory for Wall Street banks that have fought an unprecedented campaign to weaken the rule, the US Federal Reserve announced major changes to a proposal for stronger bank capital requirements known as the &#8220;Basel III endgame&#8221;.<\/p>\n<h2>What\u2019s in Today\u2019s Article?<\/h2>\n<ul>\n<li>What is Basel III and \u2018Basel III Endgame\u2019?<\/li>\n<li>The \u201cEndgame\u201d Proposal of the US<\/li>\n<li>Why are Banks Upset with the \u201cEndgame\u201d Proposal of the US?<\/li>\n<li>Decision to Make Major Changes in the \u201cEndgame\u201d Proposal<\/li>\n<\/ul>\n<h2>What is Basel III and \u2018Basel III Endgame\u2019?<\/h2>\n<ul>\n<li>The Basel Committee on Banking Supervision is a panel convened by the\u00a0<strong>Bank for International Settlements (BIS)<\/strong>\u00a0in Basel, Switzerland.\n<ul>\n<li><strong>It aims to ensure<\/strong>\u00a0that regulators globally apply similar minimum capital standards so that banks can survive loan losses during tough times.<\/li>\n<\/ul>\n<\/li>\n<li>The committee\u2019s \u201cBasel III\u201d standard was agreed after the\u00a0<strong>2007-09 global financial crisis<\/strong>\u00a0and includes<strong>\u00a0numerous capital, leverage and liquidity requirements<\/strong>.<\/li>\n<li>Regulators across the world have worked for years to implement many of those standards and the so-called \u201cendgame\u201d (agreed in 2017) is the final iteration.<\/li>\n<\/ul>\n<h2>The \u201cEndgame\u201d Proposal of the US:<\/h2>\n<ul>\n<li>The \u201cendgame\u201d proposal (unveiled in July 2023 after the failure of 3 lenders in 2023)\u00a0<strong>refines Basel\u2019s approach<\/strong>\u00a0to setting capital based on the riskiness of banks\u2019 activities.<\/li>\n<li>The U.S. proposal\u00a0<strong>would overhaul how banks gauge their risk<\/strong>, and in turn, how much capital they should set aside as a cushion against potential losses.<\/li>\n<li><strong>The main areas of focus are &#8211;<\/strong>\n<ul>\n<li><strong>Credit risk:<\/strong>\u00a0To gauge credit risk, regulators are seeking to\u00a0<strong>end banks\u2019 ability to use their own internal risk models\u00a0<\/strong>when determining how much capital should be held against lending activities.<\/li>\n<li><strong>Market risk:<\/strong>\u00a0Similarly, the proposal would establish new requirements for how banks gauge the risk posed by swings in the markets and potential losses from trading.<\/li>\n<li><strong>Operational risk:<\/strong>\u00a0This refers to the potential losses banks could face from unexpected sources, such as failed internal policies, management mistakes, litigation costs or external events.<\/li>\n<\/ul>\n<\/li>\n<li>The rules, w<strong>hich would apply to banks with over $100 billion in assets<\/strong>, would overhaul the way the biggest banks manage their capital, with implications for lending and trading activities.\n<ul>\n<li>However, banks say additional capital is unnecessary and will hurt the economy, and have aggressively lobbied against the project.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Why are Banks Upset with the \u201cEndgame\u201d Proposal of the US?<\/h2>\n<ul>\n<li>While the rules have been years in the making,\u00a0<strong>banks had hoped that U.S. regulators would offer relief elsewhere<\/strong>\u00a0by adjusting existing capital requirements to help offset the new hikes.<\/li>\n<li>They argue banks are well-capitalised, having withstood the COVID-19 pandemic and regularly clearing the Fed\u2019s annual stress tests, and\u00a0<strong>any capital hikes are unjustified.<\/strong><\/li>\n<li>Banks have also complained that regulators\u00a0<strong>have not provided sufficient data to justify the new increases<\/strong>, and have even threatened to sue.<\/li>\n<\/ul>\n<p><strong>Decision to Make Major Changes in the \u201cEndgame\u201d Proposal:<\/strong><\/p>\n<ul>\n<li>Following months of criticism and pressure from the industry, U.S. regulators are expected to meaningfully reduce the impact of the proposal in a broad rewrite.<\/li>\n<li>Such a step &#8211;\n<ul>\n<li><strong>Could ease industry complaints<\/strong>\u00a0by giving them a chance to offer more feedback,<\/li>\n<li><strong>But would significantly delay the effort and potentially imperil it<\/strong>, as regulatory leadership could change following the November presidential election.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q.1. What is the Bank for International Settlements (BIS)?<\/h3>\n<p>The BIS is an international financial institution which is owned by member central banks. Its primary goal is to foster international monetary and financial cooperation while serving as a bank for central banks.<\/p>\n<h3>Q.2. Is Basel III implemented in India?<\/h3>\n<p>The RBI has introduced norms on the Basel III capital framework, fund raising, exposure guidelines, and norms on classification and valuation of investment portfolios for All India Financial Institutions (AIFIs), which will come into effect from April 2024.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Basel III\u201d was agreed after the 2007-09 global financial crisis and includes numerous capital, leverage and liquidity requirements and \u201cendgame\u201d is the final iteration of these standards.<\/p>\n","protected":false},"author":5,"featured_media":40362,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-40361","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=40361"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40361\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/40362"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=40361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=40361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=40361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}