The Bank for International Settlements (BIS) is an international financial institution which is owned by member central banks. Its primary goal is to foster international monetary and financial cooperation while serving as a bank for central banks. With its establishment in 1929, its initial purpose was to oversee the settlement of World War I war reparations.
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic action that together facilitate international flows of financial capital for purposes of investment and trade financing. Since emerging in the late 19th century during the first modern wave of economic globalization, its evolution is marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets. In the late 1800s, world migration and communication technology facilitated unprecedented growth in international trade and investment. At the onset of World War I, trade contracted as foreign exchange markets became paralyzed by money market illiquidity. Countries sought to defend against external shocks with protectionist policies and trade virtually halted by 1933, worsening the effects of the global Great Depression until a series of reciprocal trade agreements slowly reduced tariffs worldwide. Efforts to revamp the international monetary system after World War II improved exchange rate stability, fostering record growth in global finance.
Operational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as operational risk management. The definition of operational risk, adopted by the European Solvency II Directive for insurers, is a variation adopted from the Basel II regulations for banks: "The risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events, differ from the expected losses". The scope of operational risk is then broad, and can also include other classes of risks, such as fraud, security, privacy protection, legal risks, physical or environmental risks. Operational risks similarly may impact broadly, in that they can affect client satisfaction, reputation and shareholder value, all while increasing business volatility.
The Basel Accords refer to the banking supervision accords issued by the Basel Committee on Banking Supervision (BCBS).
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. It is now extended and partially superseded by Basel III.
The Basel Committee on Banking Supervision (BCBS) is a committee of banking supervisory authorities that was established by the central bank governors of the Group of Ten (G10) countries in 1974. The committee expanded its membership in 2009 and then again in 2014. As of 2019, the BCBS has 45 members from 28 jurisdictions, consisting of central banks and authorities with responsibility of banking regulation.
Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is composed of core capital, which consists primarily of common stock and disclosed reserves, but may also include non-redeemable non-cumulative preferred stock. The Basel Committee also observed that banks have used innovative instruments over the years to generate Tier 1 capital; these are subject to stringent conditions and are limited to a maximum of 15% of total Tier 1 capital. This part of the Tier 1 capital will be phased out during the implementation of Basel III.
Basel I is the first Basel Accord. It arose from deliberations by central bankers from major countries during the late 1970s and 1980s. In 1988, the Basel Committee on Banking Supervision (BCBS) in Basel, Switzerland, published a set of minimum capital requirements for banks. It is also known as the 1988 Basel Accord, and was enforced by law in the Group of Ten (G-10) countries in 1992.
The Korea Deposit Insurance Corporation (KDIC) is a deposit insurance corporation, established in 1996 in South Korea to protect depositors and maintain the stability of the financial system. The main functions of KDIC are insurance management, risk surveillance, resolution, recovery, and investigation.
Malcolm D. Knight is a Canadian economist, policymaker and banker. He is currently Visiting Professor of Finance at the London School of Economics and Political Science and a Distinguished Fellow at the Center for International Governance Innovation. From 2008 to 2012, Knight was Vice Chairman of Deutsche Bank Group where he was responsible for developing and coordinating the bank's global approach to issues in financial regulation, supervision, and financial stability. He served as general manager of the Bank for International Settlements from 2003 to 2008 and as Senior Deputy Governor of the Bank of Canada (1999-2003), after holding senior positions at the International Monetary Fund (1975-1999).
The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established in the 2009 G20 Pittsburgh Summit as a successor to the Financial Stability Forum (FSF). The Board includes all G20 major economies, FSF members, and the European Commission. Hosted and funded by the Bank for International Settlements, the board is based in Basel, Switzerland, and is established as a not-for-profit association under Swiss law.
The International Association of Insurance Supervisors (IAIS) is a voluntary membership organization of insurance supervisors from more than 200 jurisdictions, constituting 97% of the world's insurance premiums. It is the international standards-setting body for the insurance sector. The IAIS was established in 1994 and operates as a verein, a type of non-profit organisation under Swiss Civil Law.
The Joint Forum is an international group bringing together financial regulatory representatives from banking, insurance and securities. It works under the international bodies for these sectors, the Basel Committee on Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS). The group develops guidance, principles and identifies best practices that are of common interest to all three sectors.
Basel III is the third Basel Accord, a framework that sets international standards for bank capital adequacy, stress testing, and liquidity requirements. Augmenting and superseding parts of the Basel II standards, it was developed in response to the deficiencies in financial regulation revealed by the financial crisis of 2007–08. It is intended to strengthen bank capital requirements by increasing minimum capital requirements, holdings of high quality liquid assets, and decreasing bank leverage.
During the financial crisis of 2007–2008, several banks, including the UK's Northern Rock and the U.S. investment banks Bear Stearns and Lehman Brothers, suffered a liquidity crisis, due to their over-reliance on short-term wholesale funding from the interbank lending market. As a result, the G20 launched an overhaul of banking regulation known as Basel III. In addition to changes in capital requirements, Basel III also contains two entirely new liquidity requirements: the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR).
A systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. They are colloquially referred to as "too big to fail".
Yoo JaeHoon is the Chairman and President of the Korea Deposit Insurance Corporation (KDIC). He is also working as ex-officio Commissioner of the Financial Services Commission, and a member of the Executive Council of the International Association of Deposit Insurers (IADI).
A financial regulatory authority or financial supervisory authority is a public authority whose role is to ensure the proper implementation of financial regulation within its scope of responsibility.
Basel III: Finalising post-crisis reforms, sometimes called the Basel III Endgame, Basel 3.1 or CRR3, are changes to international standards for bank capital requirements that were agreed by the Basel Committee on Banking Supervision (BCBS) in 2017 and are due for implementation in January 2023. They amend the international banking standards known as the Basel Accords.
Jameel Ahmed is a Pakistani economist and banker who currently serves as the Governor of the State Bank of Pakistan. He assumed the position on 26 August 2022, after being appointed by the President of Pakistan for a five-year term.
