BANK OF INTERNATIONAL SETTLEMENT

Submitted to : Miss. Ashwini Madam.

1

Submitted by : Rohini S. Sadre. Chaitali S. Jog (5746) (5745)

Pratiksha S. Patil. (5747) Chetan V. Patil. (5744)

Sapana C. mundhe.(5739)

CONTENTS

INTRODUCTION HISTORY FUNCTIONS FEATURES OBJECTIVES RECENT DEVELOPMENT BASEL I BASEL II BESAL I Vs. BASEL II COCLUSION REFERENCE

Introduction
The bank for International Settlement (BIS) is such an agency. The new international financial system requires an international agency which can coordinate the activities of national banking regulatory and supervisory bodies. Today in the world of business is an environment of borderless finance. The volume of international transaction has increased significantly during the past few decades. World trade and investment is now measured in the trillion. Banks are more larger and more sophisticated as a result of cross border merger and acquisition activity and innovations in electronic technology.

MEANING:
The bank of International Settlement is an international organization which develops international monetary financial cooperation & served as a bank of central bank.

LOCATED IN:
BIS is located in Basel, Switzerland, and has representative offices in Mexico City and Hong Kong. Member banks include the Bank of Canada, the Federal Reserve Bank and the European Central Bank.

HISTORY:

The BIS was formed in 1930. The bank was originally intended to facilitate money transfers arising from obligation under the Versailles treaty. Post World War II there were allegations that the BIS had acted inappropriately during world war ll. As a result at the Bretton woods conference in July, 1944 there was a demand for liquidation of the BIS. However, this was never undertaken. The decision to liquidation the BIS was officially reversed in 1948.

The BIS was origin in both government and private individuals, but in recent years the BIS has bought back all shares held by the private investors, and is now wholly owned by its member central banks.

Since 2004, the BIS submit its accounts in terms of Special Drawing Right (SDRs). As of march 31, 2007, the bank had total assets of USD 409.15 billion (SDR/USD 1.5100) which included 150 tons of fine gold.

FEATURES:

1. It is an international organization of central banks which promotes international monetary and financial cooperation and serves as a bank for central banks. 2. It co-ordinates regulations pertaining to financial services. 3. It promotes international financial stability. 4. It is not accountable to any national government. 5. It provides banking services only to central banks helping with management of foreign currency reserves of the central banks. 6. It also provides emergency financial assistance to the central banks. 7. It is based in Basel, Switzerland, and was established under the Hague agreements of 1930. The BIS has 57 members.

OBJECTIVES:

The main aim & objective of BIS is to excel in service to central banks & financial authority. It also aims in promoting monitory and financial stability for international financial operation. BIS acts as an opportunity for cooperation among central banks and financial community. It also acts as a bank to central banks and international organization. The objective of the BIS is to make monetary policy more predictable and transparent among its member central banks. The primary objective of the BIS is to set capital adequacy requirements for an international point of view. To make banking operations safer for customers and reduce risk.

RECENT DEVLOPMENTS:
The BIS provides the Basel committee on banking supervision which has played a central role in establishing the Basel Capital Agreement of 1988 and 2004. The Basel Committee on banking supervision provides a forum for international cooperation on banking supervisory matters. Its objective is to enhance understanding of important supervisory issues and improve the quality of banking supervision worldwide.

Basel : 1
This accord represents the set of international banking regulations put forth by the Basel Committee on Bank Supervision, in 1988, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Bank operating internationally were required to maintain a minimum amount (8%) of capital based on a percentage of risk-weighted assets. It focused mainly on credit risk by creating an asset classification system. This classification system grouped a banks assets into five risk categories for which specific risk weights were assigned. Each bank was required to maintain capital equal to at least 8% of its risk-weighted assets. For example, if a bank has risk- weighted assets of INR 1000 million, it was required to maintain capital of at least INR 80 million.

BASEL II:

This accord represent an integration of Basel I capital standards with national regulations, by setting the minimum capital requirements for financial institutions globally with the objective of ensuring institutional liquidity/ solvency. Basel II framework demand more comprehensive measurement and minimum standard for capital adequacy and national supervisory authorities are currently in the process of implementing the same in their respective jurisdictions. The new guidelines provide a closer alignment between regulatory capital requirement and the assessment of the underlying risk faced by banks. The accord became effective from July 2004. On July 2006, the committee issued a comprehensive version of Basel II framework. Additional proposals were approved in the meeting held on 8-9 December 2009. The overall objectives are to strengthen global capital and liquidity regulations and promote a more resilient banking system which will facilitate a better balance between financial innovation and sustainable growth.

COMPARISION BETWEEN BASAL I AND BASEL II NORMS:

NO BASEL I NORMS 01 02 Introduced in 1988. These norms covered assessment of only credit risk.

BASEL II NORMS Introduced in 2004. These norms covered assessment of credit, market, operational and residual risk.

03

They involved one size fits all

They involved a wider approach

approach with fixed risk weights providing for standardised for five asset classes. external rating method as well as internally developed risk assessment processes.

04

A more rigid approach with focus only on provisioning for risk.

A more flexibility approach with focus on liquidity and solvency on an on-going basis. These norms have a more comprehensive approach and provide for a changing environment.

05

These norms did not cover financial innovation such as securitisation, derivatives,etc.

06

No protection against overtrading.

Provision for a leverage ratio to avoid excess leveraging. Stringent disclosure norms to ensure greatest discipline.

07

Disclosure norms less comprehensive.

10

CONCLUSION :

It is an international organization of central banks. The BIS provides the Basel committee on banking supervision which has played a central ROLE. BIS is to excel in service to central banks & financial authority. It also aims in promoting monitory and financial stability for international financial operation.

11

REFERENCE:

Books Referred : International Finance by Dipak Abhyankar

Sites Referred :

www.google.com www.answers.com www.int.ask.com

12