The Reserve Bank today proposed timelines for banks to migrate to advanced risk norms under Basel II, which entails improved standards for banks worldwide to assess their risks. I has proposed that banks can apply to the central bank for migrating to these norms earliest by April 1, 2012, while it may give approvals for that by March 31, 2014. The Reserve Bank said banks are advised to undertake an internal assessment of their preparedness for migration to the advanced norms and decide whether to migrate to them. Already, basic approach for three kinds of risks relating to credit, operation and markets -- have been implemented for banks in India.
Basel II norms are improved version of Basel I, for preparing banks to assess different kinds of risks. These norms assume significance after the global financial crisis. Basel I required banks to calculate a minimum level of capital that has to be kept aside by assigning risk weight for each of a limited number of asset classes like mortgages, consumer lending, corporate loans etc. Basel II goes beyond this, allowing banks to use their own risk measurement models to calculate the capital that has to be kept aside.
Basel II norms are improved version of Basel I, for preparing banks to assess different kinds of risks. These norms assume significance after the global financial crisis. Basel I required banks to calculate a minimum level of capital that has to be kept aside by assigning risk weight for each of a limited number of asset classes like mortgages, consumer lending, corporate loans etc. Basel II goes beyond this, allowing banks to use their own risk measurement models to calculate the capital that has to be kept aside.
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