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Bank Supervision | Implementation of Basel Standards in Serbia | Basel II

Basel II

Basel II is the result of several year long intensive cooperation of the BCBS with banks and institutions from financial sector and it improves many weaknesses of Basel I. For further enhancement of strength and stability of the international banking system, with the convergence of capital requirements by country, in June 2004 the Committee issued a revised Framework, and two years later its comprehensive version. The version from June 2006 includes additional guidelines which primarily relate to the treatment of trading activities and double default effects and amendments related to market risks and includes all provisions of Basel I which remained effective.

New Framework (Basel II) consists of three pillars:

  • Pillar 1 defines minimum capital requirements for credit, market and operational risk, with the possibility of using sophisticated models and techniques for their calculation;
  • Pillar 2 strengthens the relation between the optimum capital requirements and nature and level of risks that a bank faces in its operations, introducing ICAAP (Internal Capital Adequacy Assessment Process) and strengthening the supervision process;
  • Pillar 3 complements the relation between Pillar I and Pillar II by stressing the significance of market discipline, by means of introducing minimum requirements for publishing information by the banks.

 

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Pillar 1
Pillar 2
Pillar 3