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• «Basel 3» return the banks to square one
Monday, 26 Desimbr 2011
Adnan Ahmed Yousif *
Set out the full observance of the standards «Basel 3» to be between 2013 to 2019, but despite this the time interval between the deadline and the start of the day, prepared earlier Gulf banks to implement the standards. The UAE announced its readiness to implement over the next year, said Central Bank Governor Sultan Al Suwaidi said the UAE is committed to the plan time for the application at the international level, which includes three phases, applying the first during the next year, stressing that the banking supervision in the state in line with best international practices and in accordance with international agreements signed by the State, especially an agreement «Basel 2» and «Basel 3».
And announced «Saudi Arabian Monetary Agency» that banks in Saudi Arabia ready from now for the application of standards «Basel 3», At the level of indicators solvency of commercial banks in the Kingdom, the total capital adequacy ratio (the standard for the Basel Committee), the end of 2010 about 17 percent, while the total liquidity ratio to 35.7 per cent. The Foundation indicated that the regulatory capital of banks in Saudi Arabia consists almost entirely in the form of ordinary shares, and the budgets of local banks are not lending too, while helping the proportion of deposits to capital and reserves to avoid excessive lending.
And enjoy the banking institutions in Bahrain by the solvency capital requirements than «Basel 3», as Bahraini banks maintain solid reserves exceed seven percent of the total assets required by the new global standards.
But the rules «Basel 3» to answer the many questions her global financial crisis over the past few years, especially the great imbalance that hit the global financial system. The big question that presents itself today is: Will the standards «Basel 3», more effective than standard «Basel 2»? Will international banks will fail in the application of «Basel 3» also failed in the application of «Basel 2»? Or are these standards were not in the foundation is able to accommodate large and cascading consequences for the global financial crisis beginning in 2009?
While failing «Basel 2» in protecting banks from the credit crunch, which was exposed in 2009, seemed to the requirements of «Basel 3» a direct response to the dangers of over-funding, inflation, indebtedness of the banks, which is about banks, several large bankruptcy and merged banks, small ones larger . And moved to the heart of the crisis to the real economy affects the vital sectors.
And showed the global financial crisis and ongoing since 2008, the activity of financial markets and the phenomenon of securitization of debt were not Toizihma adequacy of capital during the crisis, emerged as the importance of doubling the capital in the investment banks that are active in these tools to continue their activities, or reduce the work in this area. Banks and customers continued to extend loans, but exaggerated in these loans because they were convinced that in a position to get rid of credit risk through securitization of debt and not worry about in the form of sufficient capacity to its customers to repay loans.
Hence the need to adopt new standards under the name «Basel 3» to increase the size of bank reserves, because many of the banks being exposed to the crisis is not ready to absorb the losses that befell him on the one hand, inflation and debt on the other.
* President of the Union of Arab Banks
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Monday, 26 Desimbr 2011
Adnan Ahmed Yousif *
Set out the full observance of the standards «Basel 3» to be between 2013 to 2019, but despite this the time interval between the deadline and the start of the day, prepared earlier Gulf banks to implement the standards. The UAE announced its readiness to implement over the next year, said Central Bank Governor Sultan Al Suwaidi said the UAE is committed to the plan time for the application at the international level, which includes three phases, applying the first during the next year, stressing that the banking supervision in the state in line with best international practices and in accordance with international agreements signed by the State, especially an agreement «Basel 2» and «Basel 3».
And announced «Saudi Arabian Monetary Agency» that banks in Saudi Arabia ready from now for the application of standards «Basel 3», At the level of indicators solvency of commercial banks in the Kingdom, the total capital adequacy ratio (the standard for the Basel Committee), the end of 2010 about 17 percent, while the total liquidity ratio to 35.7 per cent. The Foundation indicated that the regulatory capital of banks in Saudi Arabia consists almost entirely in the form of ordinary shares, and the budgets of local banks are not lending too, while helping the proportion of deposits to capital and reserves to avoid excessive lending.
And enjoy the banking institutions in Bahrain by the solvency capital requirements than «Basel 3», as Bahraini banks maintain solid reserves exceed seven percent of the total assets required by the new global standards.
But the rules «Basel 3» to answer the many questions her global financial crisis over the past few years, especially the great imbalance that hit the global financial system. The big question that presents itself today is: Will the standards «Basel 3», more effective than standard «Basel 2»? Will international banks will fail in the application of «Basel 3» also failed in the application of «Basel 2»? Or are these standards were not in the foundation is able to accommodate large and cascading consequences for the global financial crisis beginning in 2009?
While failing «Basel 2» in protecting banks from the credit crunch, which was exposed in 2009, seemed to the requirements of «Basel 3» a direct response to the dangers of over-funding, inflation, indebtedness of the banks, which is about banks, several large bankruptcy and merged banks, small ones larger . And moved to the heart of the crisis to the real economy affects the vital sectors.
And showed the global financial crisis and ongoing since 2008, the activity of financial markets and the phenomenon of securitization of debt were not Toizihma adequacy of capital during the crisis, emerged as the importance of doubling the capital in the investment banks that are active in these tools to continue their activities, or reduce the work in this area. Banks and customers continued to extend loans, but exaggerated in these loans because they were convinced that in a position to get rid of credit risk through securitization of debt and not worry about in the form of sufficient capacity to its customers to repay loans.
Hence the need to adopt new standards under the name «Basel 3» to increase the size of bank reserves, because many of the banks being exposed to the crisis is not ready to absorb the losses that befell him on the one hand, inflation and debt on the other.
* President of the Union of Arab Banks
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