Basel III and Beyond
Incisive Media, July 2011
Around the world, central bankers, regulators and governments have responded to the financial crisis with new regulation and legislation. The cornerstone of this global initiative to contain risk is Basel III – sweeping new regulatory standards for banks on capital adequacy and liquidity.
These new standards will define markets and their practices for decades to come. Already, they are reshaping institutions, business models and balance sheets.
Understanding Basel III and the thinking behind it is essential for market participants and for those charged with implementing the standards. In Basel III and Beyond, the first book-length treatment of Basel III, editors Mario Quagliariello of the European Banking Authority and Francesco Cannata of the Bank of Italy have assembled contributors from regulators and central banks involved in preparing the standards including a foreword from Mario Draghi, President of the European Central Bank.
Key chapters describe and analyse the new elements of Basel III, as well as detailing important revisions to the 2004 accord. Written by the regulators themselves, Basel III and Beyond is the essential guide to the new global banking standards.
Drawing on expert contributions from those deeply and directly involved in the creation of the new global standards, Basel III and Beyond is a must-read for market practitioners and regulators who need to understand the emerging framework of financial regulation, its implications and impact.
After three of the most tumultuous years in financial markets in living memory, the regulatory die was cast in December 2010.
Issued by the Basel Committee on Banking Supervision, the Basel III standards on capital and liquidity, along with measures from July 2009 on trading book and structured finance, are the centrepiece of the regulatory community’s response to the crisis. Slated for implementation from January 2013, Basel III must be fully phased in by January 2019.
“This book provides the reader with a comprehensive discussion of the contents of the regulatory reform, taking advantage of the knowledge of experts who contributed to shaping the new rules”.
With a foreword from Mario Draghi, president of the European Central Bank and written by experts deeply involved in these reforms, Basel III and Beyond provides a practical and global perspective on the new standards. The book combines technical rigour with an accessible style to provide the essential primer to the new regulatory blueprint and the rationale behind it.
The book is divided into four sections:
- Basel in the Shadow of the Crisis
The first section focuses on the market practices that contributed to the financial turmoil and the subsequent policy response from the G20 and the Financial Stability Board that led to the proposals of the Basel Committee.
- The New Capital Standards
The second analyses the new definition of regulatory capital, the new framework for the trading book, changes to counterparty credit risk capital rules, and the new measures for mitigating procyclicality.
- Complementing Capital Regulation
Section three analyses the elements designed to complement the capital rules: the leverage ratio, a global minimum liquidity standard, initiatives regarding credit rating agencies; how to handle systemically important banks, and remuneration.
- The Emerging Regulatory Landscape
The final section surveys the changed regulatory landscape, looking at crisis management and resolution, the impact of the new regulations, and the future architecture of financial supervision and regulation.
The book speaks to the technical aspects and disciplines of modern markets and provides summaries of the most important elements, the thinking behind them, how they will be implemented and the potential repercussions.
Basel III and Beyond is an essential resource for market participants, researchers, regulators, academics, law makers and governments worldwide.
Testimonials
"This book provides the reader with a comprehensive discussion of the contents of the regulatory reform, taking advantage of the knowledge of experts who contributed to shaping the new rules"
Mario Draghi
Governor of Bank of Italy and Chairman of the Financial Stability Board
Foreword
(Mario Draghi, Governor of the Bank of Italy)
Introduction
(Francesco Cannata, Bank of Italy and Mario Quagliariello, European Banking Authority)
Part I – Basel in the Shadow of the Crisis
1. The Big Financial Crisis
(Paul Collazos, Bank of England)
2. The Policy Response: from the G20 requests to the FSB roadmap. Working towards the proposals of the Basel Committee
(Patrizia Baudino, European Central Bank)
Part II – The New Capital Standards
3. The New Definition of Regulatory Capital
(Laetitia Meneau, Banque de France/Commissione Bancaire and Emiliano Sabatini, Bank of Italy)
4. A New Framework for The Trading Book
(Federico Cabanas, Bank of Spain)
5. Counterparty Credit Risk and Other Risk Coverage Measures
(Akhtarur Siddique, Office of the Comptroller of the Currency)
6. Tools for Mitigating the Procyclicality of Financial Regulation
(Mario Quagliariello, European Banking Authority)
Part III – Complementing Capital Regulation
7. The Regulatory Leverage Ratio
(Alan Adkins, UK Financial Services Authority)
8. The New Framework for Liquidity Risk
(Gianluca Trevisan, Bank of Italy)
9. The Discipline of Credit Rating Agencies
(Luca Giordano, Valerio Novembre and Neomisio Susi, Consob)
10. Systemically Important Banks
(Daryl Collins and David Rule, UK Financial Services Authority)
11. Regulating Remuneration Schemes in Banking
(Gerard Arqué, Isabel Argimon and Francesc Rodríguez, Bank of Spain)
Part IV – The Emerging Regulatory Landscape
12. Crisis Management and Resolution
(Giovanni Bassani, UK Financial Services Authority and Maurizio Trapanese, Bank of Italy)
13. The Impact of the new Regulatory Framework
(Francesco Cannata, Bank of Italy and Ulrich Krueger, Deutsche Bundesbank)
14. A Brazilian Perspective on the Revised Basel Framework
(Lucio Rodrigues Capelletto and Paula Cristina Seixas de Oliveira, Central Bank of Brazil)
15. A New Institutional Framework for Financial Regulation and Supervision
(Andrea Enria, European Banking Authority and Pedro Texeira, European Central Bank)
Annex I - Structural Regulation Redux: The Volcker Code
(Marco Bevilacqua, Bank of Italy)
Annex II - The Changing Uses of Contingent Capital
(Massimo Libertucci, Bank of Italy)
- Paul Collazos, Bank of England
- Francesco Cannata, Bank of Italy
- Mario Quagliariello and Andrea Enria, European Banking Authority
- Gerarad Arqué, Isabel Argimon and Francesc Rodríguez, Bank of Spain
- Laetitia Meneau, Banque de France
- Lucio Rodrigues Capelletto and Paula Cristina Seixas de Oliveira, Central Bank of Brazil
- Luca Giordano, Valerio Novembre and Neomisio Susi, Consob
- Ulrich Krueger, Deutsche Bundesbank
- Pedro Texeira and Patrizia Baudino, European Central Bank
- Akhtarur Siddique, Office of the Comptroller of the Currency
- Alan Adkins and David Rule, UK Financial Services Authority.
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