Analysis of Basel III and Risk Management in Banking

Abstract

Over the years, financial institutions have always acted as conduits for individuals/organizations to invest their surplus funds and also lend funds whenever needed thereby creating a fiduciary relationship between these two parties. To protect the interest of these parties, series of legislation have being formulated to aid banks in managing potential risks ranging from credit risk, market risk and operational risk. To address this potential risk, the Basel Committee on Banking service (BCBS) proposed Basel III which aim at ensuring adequate capital base, provide liquidity coverage and coverage to mitigate systemic risk. In view of the reforms proposed by Basel III, the framework has failed to address numerous issues. To address this menace in the banking sector, Basel III should not be viewed as a only conduit to resolve financial crisis but there is the need to seeks ways in integrating specific government financial regulations with the provisions of Basel III.