BANKING RISK 24: BASEL III - CHANGED CONCEPT OF CAPITAL (1)

Summary: By introducing Basel III Accord standards about capital, the Basel Committee provides stronger incentives to banking industries and national supervisors to work preventively on the strength of financial stability of banks. The Basel III changes of capital concept, compared to Basel II, are qualitative and quantitative, in the sense of the precisely defined role and importance of certain capital categories in respect of risk exposures and their function in the loss covering (Common Equity Tier 1 Capital, Capital conservation buffer, Countercyclical buffer), as well as the level of capital charges regarding the risk weighted assets for these capital categories.