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The Basel ii Capital Accord
Basel II: Revised framework
 
The Basel II Framework describes a more comprehensive measure and minimum standard for capital adequacy that national supervisory authorities are now working to implement through domestic rule-making and adoption procedures.
 
It seeks to improve on the existing rules by aligning regulatory capital requirements more closely to the underlying risks that banks face.
 
In addition, the Basel II Framework is intended to promote a more forward-looking approach to capital supervision, one that encourages banks to identify the risks they may face, today and in the future, and to develop or improve their ability to manage those risks. As a result, it is intended to be more flexible and better able to evolve with advances in markets and risk management practices.

The efforts of the Basel Committee on Banking Supervision to revise the standards governing the capital adequacy of internationally active banks achieved a critical milestone in the publication of an agreed text in June 2004.

In November 2005, the Committee issued an updated version of the revised Framework incorporating the additional guidance set forth in the Committee's paper The Application of Basel II to Trading Activities and the Treatment of Double Default Effects (July 2005).

On 4 July 2006, the Committee issued a comprehensive version of the Basel II Framework. Solely as a matter of convenience to readers, this comprehensive document is a compilation of the June 2004 Basel II Framework, the elements of the 1988 Accord that were not revised during the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate Market Risks, and the 2005 paper on the Application of Basel II to Trading Activities and the Treatment of Double Default Effects. No new elements have been introduced in this compilation.
 
The Basel Committee
 
Main Expert Sub-Committees
  • The Accord Implementation Group
  • The Policy Development Group
  • The Accounting Task Force
  • The International Liaison Group
 
The Basel ii Capital Accord - Basel Committee, The Accord Implementation Group (AIG)
 
The Accord Implementation Group (AIG) was established to share information and thereby promote consistency in implementation of the Basel II Framework.
 
While the AIG provides a forum for discussing members' approaches to implementing Basel II, it is not intended to mandate uniformity of application of the Framework.

Currently the AIG has two subgroups that share information and discuss specific issues related to Basel II implementation.
 
The Validation Subgroup (AIGV) explores issues related to the validation of systems used to generate the ratings and parameters that serve as inputs into the internal ratings-based approaches to credit risk.
 
The Operational Risk Subgroup (AIGOR) addresses issues related primarily to banks' implementation of advanced measurement approaches for operational risk.

The Basel ii Capital Accord - Basel Committee, The Policy Development Group (PDG)
 
The Policy Development Group (PDG) replaced the Committee's former Capital Task Force. Its primary objective is to support the Committee by identifying and reviewing emerging supervisory issues and, where appropriate, proposing and developing policies that promote a sound banking system and high supervisory standards.

Seven working groups report to the PDG:
  • The Risk Management and Modelling Group (RMMG)
  • The Research Task Force (RTF)
  • The Working Group on Liquidity
  • The Definition of Capital Subgroup
  • A Basel II Capital Monitoring Group
  • The Trading Book Group (TBG) and
  • The Cross-border Bank Resolution Group
The Risk Management and Modelling Group serves as the Committee's point of contact with the industry on the latest advances in risk measurement and management. It focuses on assessing the range of industry risk management practices and the development of supervisory guidance to promote enhanced risk management practices.

The Research Task Force serves as a forum for research economists from member institutions to exchange information and engage in research projects on supervisory and financial stability issues.
 
It also acts as a mechanism for facilitating communication between economists at member institutions and in the academic sector.

The Trading Book Group adresses issues relating to the application of Basel II to certain exposures arising from trading activities. A current focus of this group is the development of principles for the treatment of event risk in the trading book.
 
The Definition of Capital Subgroup explores emerging trends in eligible capital instruments in member jurisdictions.

In the course of implementation of Basel II, national supervisors are monitoring capital requirements to ensure that banks in their jurisdiction maintain a solid capital base throughout the economic cycle. The Basel Committee has established a Basel II Capital Monitoring Group that will from time to time share national experiences in monitoring capital requirements.

Cross-border Bank Resolution Group: the CBRG is comparing the national policies, legal frameworks and the allocation of responsibilities for the resolution of banks with significant cross-border operations.
 
 
The Basel ii Capital Accord - Basel Committee, The Accounting Task Force (ATF)
 
The Accounting Task Force (ATF) works to help ensure that international accounting and auditing standards and practices promote sound risk management at financial institutions, support market discipline through transparency, and reinforce the safety and soundness of the banking system.
 
To fulfil this mission, the task force develops prudential reporting guidance and takes an active role in the development of international accounting and auditing standards.

Three working groups report to the ATF:
  • The Conceptual Framework Issues Subgroup
  • The Financial Instruments Practices Subgroup
  • The Audit Subgroup
The Conceptual Framework Issues Subgroup monitors and responds to the conceptual accounting framework project of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board in the United States.

The Financial Instruments Practices Subgroup assesses implementation of international accounting standards related to financial instruments, and the links between accounting practices in this area and prudential supervision.

The Audit Subgroup promotes reliable financial information by exploring key audit issues from a banking supervision perspective.
 
It focuses on responding to international audit standards-setting proposals, other issuances of the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants, and audit quality issues.
 
The Basel ii Capital Accord - Basel Committee, The International Liaison Group (ILG)
 
The newly established International Liaison Group (ILG) replaces the former Core Principles Liaison Group - which had focused considerably on the initial implementation and later revision of the 1997 Core Principles for Effective Banking Supervision - and provides a forum for deepening the Committee's engagement with supervisors around the world on a broader range of issues.
 
It gathers senior representatives from eight Committee member countries (France, Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States), 16 supervisory authorities that are not members of the Committee (Argentina, Australia, Brazil, Chile, China, the Czech Republic, Hong Kong, India, Korea, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, and the West African Monetary Union), the European Commission, the International Monetary Fund, the World Bank, the Financial Stability Institute, the Association of Supervisors of Banks of the Americas and the Islamic Financial Services Board.
 
Two working groups report to the ILG:
  • The ILG working group on Capital (ILGC)
  • The Anti-Money Laundering and Countering the Financing of Terrorism Expert Group (AML/CFT EG).
The ILGC is working together with the AIG on Basel II implementation issues and both groups regularly hold joint meetings.

The AML/CFT EG is responsible for monitoring AML/CFT issues that have a bearing on banking supervision.
 
The Basel ii Capital Accord - Basel Committee, Coordination with other standard setters

Formal channels for coordinating with supervisors of non-bank financial institutions include the Joint Forum, for which the Basel Committee Secretariat provides the secretariat function, and the Coordination Group.
 
The Joint Forum was established in 1996 to address issues common to the banking, securities and insurance sectors, including the regulation of financial conglomerates.
 
The Coordination Group is a senior group of supervisory standard setters comprising the Chairmen and Secretaries General of the Committee, the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS), as well as the Joint Forum Chairman and Secretariat.
 
The Coordination Group meets twice annually to exchange views on the priorities and key issues of interest to supervisory standard setters. The position of chairman and the secretariat function for the Coordination Group rotate among the member representatives of the three standard setters every two years.
 

     

 
Become a Certified Basel ii Professional (CBiiPro)
Basel ii Distance Learning and Certification

 The Cost:
 US$ 297

What is included in this price:

A. The official presentations we use in our instructor-led classes (1880 slides)
The presentations have been updated after the Basel ii Amendment (July 2009, Enhancements to the Basel II framework, Supplemental Guidance)

 B. Up to 3 Online Exams
 There is only one exam you need to pass, in order to become a Certified Basel ii Professional (CBiiPro).
If you fail, you must study again the official presentations, but you do not need to spend money to try again. Up to 3 exams are included in the price.
 To learn more you may visit:
www.basel-ii-association.com/Questions_About_The_Certification_And_The_Exams_1.pdf
www.basel-ii-association.com/Certification_Steps_CBiiPro.pdf
 
C. Personalized Membership Certificate printed in full colour.
Processing, printing, packing and posting to your office or home

To learn more:
www.basel-ii-association.com/Distance_Learning_Online_Certification.htm