Economist Report : BASEL III- IMPLEMENTATION & CHALLENGES

 OVERVIEW

The third Basel accord is an international regulatory framework governing capital adequacy norms, stress testing and other liquidity related risks for banks around the world. It should be noted that adopting the framework is voluntary. The measures prescribed under the framework serve as a minimum standard for central banks around the globe to adopt in their home countries. The purpose of Basel-III was to strengthen the banking system and address the relevant risk factors in the wake of the 2007-08 financial crisis.

The second Basel accord had apparently lacked in the following respects-

·         Insufficient capital reserves

·         Lack of a uniform definition of capital

·         Underestimation of liquidity risk

The third accord attempts to overcome the above shortcomings as well as better address counterparty credit risk.

Basel-III was agreed upon by the members of the Basel Committee on Banking Supervision (BCBS), one of the committees of the Bank for International Settlements (BIS). BIS is of the nature of a limited international company owned by member central banks (including Reserve Bank of India). BIS is located in Basel, Switzerland. One of the purposes of BIS is to foster discussion and collaboration among central banks and serving as a banker to the central banks.

Apart from India, other members include China, South Africa, European Union, France, Germany, United States et al.

The full implementation of Basel-III is set to be completed by 31^st March, 2019.

The third Basel accord can be seen as addressing the following requirements-

·         Strengthening the global capital framework (ensuring minimum capital requirements and buffers)

·        Introduction of a global liquidity standard ( LCR-Liquidity Coverage Ratio, NSFR- Net Stable Funding Ratio)

Economist Report : GDP Quarter -1 , FY 2014-15 Results: First Cut

GDP is defined as Gross Domestic Production, which is total market value of all the goods and services produces within a country in a defined time period. The values used are market values of the final goods and services.

In India, GDP is calculated on the basis of GVA (Gross Value Added) by each industry at the basic prices. Previously, GDP was calculated on the basis of the factor prices. GVA is value of output less the value of intermediate consumption. GDP is sum of GVA for each sector net of taxes and subsidies.

GVA approach for calculating GDP

GVA at basic prices was INR 25.80 lakh Cr for Q1 FY16 as against INR 24.10 lakh Cr for Q1 FY15.  Thereby, it transcended by 7.10% y-o-y.  CSO (Central Statistical Office) divided Indian industry into following subheads:

a.      Agriculture, forestry and fishing

Ø  Quarterly GVA at basic prices for this sector grew at 1.9% in Q1 FY16. It had grown at (1.4%) in Q4 FY 15 and 2.6% in Q1 FY15.

Ø  This sector is further decomposed into fruits, vegetables and crops; and live stock, forestry and fisheries. Share of both sub sector is shown in the graph given below: