Consider the following statements regarding BASEL Standards:
1. Under BASEL-II, banks and financial institutions have to reserve money in a fixed amount to tackle international financial risks.
2. Under Basel-III tier – 3 capital has to be maintained as earlier which is used for market risk.
Which of the above statement is/are correct?
Answer: A
Objective of Basel-2 is to ensure that capital allocation is more risk sensitive. Enhance discloser requirement which will allow market participants to assess the capital adequacy of an institution. Basel-2 is the second of the BASEL Accords which are recommendation on banking laws and regulation issued by Basel committee on banking supervision.