Banking Exam Question - Comparison of Capital Requirement Under BASEL-II & BASEL-III | What are the Changes in BASEL-III by NRB 2074 Directives? Explain

Comparison of capital requirement under BASEL-II and BASEL-III

Requirements	Under BASEL-II	Under BASEL-III
Minimum ratio of total capital to RWAS	8%	10.50%
Minimum ratio of common equity to RAWS	2%	4.50% to 7%
Tier I capital to RWAS	4%	6%
Capital conservation buffers to RWAS	None	2.50%
Core tier I capital to RWAS	2%	5%
Leverage ratio	None	3%
Countercyclical buffer	None	0% to 2.5%
Minimum liquidity ratio	None	TBD (2015)
Systemically important financial institutions charge	None	TBD (2011)

Features of BASEL-III

• Better Capital Quality
• Capital Conservation Buffer
• Countercyclical Buffer
• Minimum Common Equity and Series
• Profit Ratio
• Liquidity Ratio
• Systemically Important Financial Institution
• Leverage Ratio
• Minimum Common equity and Tier 1 Capital Requirements

Function of BASEL-III

• Regulation
• Supervision
• Strengthen
• Risk Management of the Banking Sector