The following Financial Services guidance note Produced in partnership with Morrison & Foerster LLP provides comprehensive and up to date legal information covering:
This note provides a legislative history of Basel II which preceded the Basel III reforms. For further information regarding Basel III and CRR and CRD IV, please see CRD IV—essentials.The Basel II Framework, published in its comprehensive form in July 2006 by the Basel Committee of Banking Supervision (BCBS), provided for three regulatory 'pillars' to apply in respect of internationally active banks:
first pillar—minimum capital requirements to be held by banks in respect of their credit risk, operational risk and market risk.
second pillar—supervisory review process, under which banking supervisors review how well banks are assessing their capital requirements for their risks and, if required, take action if they are not satisfied with the banks’ assessments, and
third pillar—market discipline, under which banks are required to make disclosure of information relevant to participants in the financial markets.
On 21 April 2015, the BCBS published a press release on the removal of certain national discretions from the Basel II capital framework.
The BCBS agreed to remove national discretions relating to the following issues:
treatment of past-due loans
definition of retail exposures
transactional arrangements for corporate, sovereign, bank and retail exposures
rating structure standards for wholesale exposures
internal and external audit
The BCBS noted that the national discretion relating to the internal ratings-based approach treatment of equity exposures expired in 2016. In the same press
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