Analysis of Basel III and Risk Management in Banking

Abstract

Over the years, financial institutions have always operated as channels for lenders and borrowers. In view of their activities, the banks and other financial institutions are able to accumulate surplus funds from these investors (individuals/organizations) and lend these funds to other investors with deficit funding thereby creating a fiduciary relationship between these two parties. The study analyzed and assessed the effectiveness of Basel III to manage risk in banking. To analyze their activities, the study assessed efficacy of risk assessment procedures and regulations proposed by the Basel Committee on Banking Service (Basel III) protect the interest of these parties. Potential risks ranging from credit risk, market risk and operational risk were analyzed. In view of the reforms proposed by Basel III, the framework has failed to address numerous issues. To address this menace in the banking sector, Basel III should not be held as the only conduit to resolve financial crisis, but there is the need to seek other systems in integrating specific government financial regulations with the provisions of Basel III.

Keywords: Banking, Basel III, Crises, Financial, Risk, operational.