Difference between revisions of "Three Pillars of Capital"

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''Banking - regulation - capital adequacy.''
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''Banking - regulation - capital adequacy''
  
 
The Three Pillars of Capital is a concept introduced by Basel II.
 
The Three Pillars of Capital is a concept introduced by Basel II.
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* [[Market risk]]
 
* [[Market risk]]
 
* [[Operational risk]]
 
* [[Operational risk]]
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* [[Pillar 1]]
 
* [[Pillar 2]]
 
* [[Pillar 2]]
 
* [[Pillar 3]]
 
* [[Pillar 3]]

Latest revision as of 11:44, 16 November 2016

Banking - regulation - capital adequacy

The Three Pillars of Capital is a concept introduced by Basel II.

  • Pillar 1 establishes minimum capital requirements based on market, credit and operational risks, and a minimum leverage ratio.
  • Pillar 2 addresses firm-wide governance and risk management, among other matters. Additional capital requirements may be imposed by supervisors under Pillar 2, depending on their evaluation of the individual bank.
  • Pillar 3 requires banks to make enhanced disclosures to the market. The idea is that those following better practice will enjoy lower-cost funding from the market, thereby encouraging best practice via 'market discipline'.


See also