basel iii in licensed commercial banks of sri lanka
Since the early days of banking, it was identified that a uniform regulatory framework needs to be introduced to safeguard the global financial sector. With the exponential increase of international trade during the 2nd half of the 20th century, the need for international regulations for banking was more evident.
The Basel Accord has its
origins in the financial turmoil of 1973. After the collapse of Bretton Woods’s
system of managed exchange rates, banks worldwide faced considerable foreign
exchange losses which led to banking supervisors globally to formulate a
regulatory framework for the banking sector.
As a result the Basel
Committee of Banking Supervision formulated a minimum set of requirements for
the operation of banks in 1988 and the G10 countries adopted this framework in
1992. This accord was heavily criticized in subsequent years for measuring risk
only in terms of credit. This resulted in the introduction of Basel II which
had a more wide angled approach to risks faced by the banking sector. However
with the financial crisis that occurred in Western Countries in 2007; the need
of putting forward a new accord to replace Basel II was identified. The Basel
III was first introduced in 2010/11 and was modified in 2013. This accord gives
emphasis to areas like Capital Adequacy, Stress Testing and Liquidity Coverage.
As the March 2019
deadline for Basel III compliance looms ever closer, banks across the globe
including Sri Lanka race against the clock to meet the requirements outlined by
Basel III. In this research the main barriers and challenges faced by Licensed
Commercial Banks in Sri Lanka and their relationship for the successful
implementation of Basel III will be identified. Further methods to overcome
these barriers and challenges will be briefly discussed.
