* Basel III decisions and their main implications for the banking system:
The supervisory body of the Basel Committee on Banking Supervision (a group of central bankers and supervisors) announced reforms to the banking sector on September 12, 2010 after meeting at the Bank's headquarters in Basel, Switzerland, under the Basel III rules. Which obliges banks to better protect themselves against future financial crises and to overcome the financial turmoil on their own without the assistance or intervention of the central bank or the government as much as possible. The proposed reforms under Basel III aim to increase capital requirements and To enhance the quality of capital for the banking sector so that it can sustain losses during periods of cyclical economic fluctuations. The transition to the new Basel system seems feasible as it will allow banks to increase their capital over a period of eight years in stages. With high capital ratios as well as with good quality capital.
* Themes of the Basel III Convention:
* The Basel III Convention consists of five main axes:
The first pillar of the new draft agreement provides for improving the quality, structure and transparency of the bank's capital base. Tier1 is limited to subscribed capital and undistributed profits, plus unrestricted capital instruments with unrestricted returns, To absorb losses as they occur.
Tier 2 capital may, in turn, be limited to capital instruments restricted for at least five years and are capable of bearing losses prior to deposit or before any third party liability to the Bank. Basel III has eliminated all other capital components that were acceptable pursuant to previous agreements .
Basel II proposals in the second pillar emphasize counterparty risk exposure arising from derivative transactions, debt financing and repo transactions by imposing additional capital requirements for the said risks, as well as for losses
Resulting from revaluation of financial assets in the light of their market price fluctuations.
The Basel Committee in the third axis introduces a new ratio, the Leverage Ratio, which aims to limit the increase in the ratio of debt in the banking system, which is a small percentage, and the risks that are not based on the leverage ratio complement the capital requirements on the basis of risk, It provides additional safeguards against risk models and error standards and acts as an additional reliable standard for the underlying risk requirements.
The fourth axis aims at preventing banks from pursuing too much lending policies, increasing excessive funding for economic activities in the period of growth and prosperity, stagnating in recession days, deepening the economic recession and prolonging its time span.
The fifth pillar of the liquidity issue, which emerged during the recent global crisis, is how important it is to the functioning of the financial system and markets. The Basel Committee is clearly interested in developing a global liquidity standard and proposes two ratios. The first is the ratio of liquidity coverage, which requires banks to keep liquid assets To cover its cash flow up to 30 days, while the second is the measurement of the medium and long term liquidity, the aim of which is to provide banks with stable sources of funding for their activities
* Transition stages to the new system (stages of implementation of Basel III decisions)
In order for banks to cope with this large increase, they either have to raise their capital (by offering new shares for public subscription or finding other sources of financing) or to reduce the volume of their loans. In both cases, it takes some time. The new banks until 2019 have the opportunity to apply these rules altogether, with implementation gradually beginning with the beginning of 2013, and by 2015 banks should have raised reserve funds to 4.5 percent, the so-called "core tier - one capital ratio "And then raise it by an additional 2.5 percent by 2019, known as" counter - cyclical ". Some countries have also put pressure on an additional protection ratio of 2.5 per cent, bringing the total to 9.5 per cent. This requirement is imposed in times of prosperity, but the Basel Group has failed to agree on this procedure and has left it to individual states, (04) and Figure (4) detail the stages of implementation of Basel III decisions
Capital adequacy ratio:
Also called Capital to Risk (Weighted Ratio Ratio) (CRAR), is the ratio of the bank's capital to its risk. It is a term that shows the relationship between the sources of the bank's capital and the risks surrounding the bank's assets and any other operations. The capital adequacy ratio is a tool to measure the Bank's solvency, ie, the ability of the Bank to meet its obligations and to face any losses that may occur in the future.
Capital adequacy ratios ("CAR") measure the amount of capital of the Bank as a percentage of exposure to credit risk
• The capital adequacy ratio determines the Bank's capacity ratio and risks such as credit, operating and other risks, and protects the Bank, depositors and other lenders. In most countries, banking regulators work to identify and monitor CAR to protect depositors, thereby maintaining confidence in the banking system.
• Other risks such as reputational risk, legal risk associated with other risks of operation, credit and others, and affect the financial position of the Bank.