Independent Commission on Banking reforms and Basel III Essay

Independent Commission on Banking reforms and Basel III - Essay Example Basel III contain set of reforms that were developed by the Basel Committee created for banking supervision so as to strengthen supervision, regulation, and management of risk in the banking sector (Angelini, 2011). Basel 3 aims to discover the ability of the banking sector to absorb shock that is experienced from economic and financial stress and improve governance and risk management. In addition, the reform measures aim to strengthen the bank's disclosures and transparency. These reforms targeted the micro-prudential or rather bank level regulation that is entrusted with raising the resilience of personal banking institutions to stress periods. In addition, Basel 3 targets the micro-prudential institution risk that can be experienced across the banking sector and amplification of those risks over time. Basel 3 analyzes it objectives into three essential parts that include capital reform, liquidity reform and other elements that are related to the financial system. The capital refo rms include quantity and quality of capital, leverage ratio, the introduction of buffers for a capital observation, complete risk coverage and a counter-cyclical capital buffer. The liquidity reforms include the long (Net Stable Funding ratio) and short-term (Liquidity Coverage ratio) ratios.   The independent Commission on Banking, on the other hand, came out with a final report that contained their recommendation on the reforms to promote competition and stability in the banking sector in the United Kingdom.