Feature Post

BANKING OMBUDSMAN AND ITS ROLE

  The Banking Ombudsman is an authority created by the Reserve Bank of India (RBI) to address customer grievances regarding banking services. It provides a cost-free, quick, and impartial resolution process for complaints against banks.  Customers can file complaints if they are dissatisfied with the services of a bank or have not received a satisfactory response from the bank within 30 days of lodging a complaint. Complaints given to Ombudsman Cover  -  Non-payment or delay in payment of cheques, drafts, or bills. Issues related to loans or advances. Non-adherence to fair practices code. Unauthorized debits or service charges. Complaints regarding internet banking or mobile banking. Delay in providing banking services. Unauthorized ATM withdrawals. Wrongful Charges. Ombudsman cannot accept complaints those are  handled by a court, tribunal, or arbitrator. Cases older than one year from the cause of action also do not entertained by Ombudsman.  How to File ...
0

RISK IN BANKING - PART 2


Risk in Banking - Part 1

 Types of Interest Rate Risk - 


 Gap or Mismatch Risks - Mismatch in amounts, maturities, repricing dates.

 Basis Risk - Due to Interest Rate changes by different magnitudes on assets and liabilities.

 Yield Curve Risk - Due to non parallel movement of interest rates.

 Embedded Option Risk - Due to premature withdrawal and prepayment of loans.

 Reinvestment Risks - Due to mismatch in future cash flows.

 Net Interest Position Risk - Due to position in different in repricing buckets.

 Liquidity Risk - Inability to meet cash outflow.

  • Funding Risk - Net outflows due to unanticipated withdrawals
  • Time Risk - Non receipt of expected inflows (NPA)
  • Call Risk - Crystallization of contingent liabilities
BASEL  III-(Aimed to control risk)

BASEL I - 1988 - An agreement to foster international convergence of capital measurement and capital standard.
BASEL II - 2004 - Accommodate diversified global banking practices. It covers credit risk operational risk along with Basel I - creditors market risk

International financial organizations such as IMF(International Monitory Fund) and world bank group use Basel standard as a benchmark of good banking regulation.

Why Basel III ?
  • Financial crisis due to inadequate bank  regulation.
  • Improvement of capital standard.
  • New global minimum liquidity stands.  
Components of Basel III
  • Common Equity Tier 1(CE Tier 1) capital must be at least 8.5% RWAs for credit risk and market risk and operational risk on an ongoing basis.
  • Tier 1 capital must be at least 7 % of RWAs on an ongoing basis.
  • Total capital (Tier 1 capital plus Tier 2 capital) must be at least 9% of RWAs on an ongoing basis. Thus within the minimum CRAR of 9%, tier 2 capital can be admitted maximum up to    2%  .
  • In Basel 3, The Tier 1 is divided into common equity Tier 1 and additional Tier 1 and such a distinction is not made in Basel II.
  • Introduced Capital Conservation Buffer - when buffer have been drawn down , one way banks should look to rebuild them is through reducing discretionary distributions of earnings. This could include not paying dividend payments, staff bonus, incentives and increase in salary structure.
  • Basel I comes under RBI
  • Basel II comes under RBI
  • Basel III comes under SEBI
  • IRRBB - Interest Rate Risk in the banking book.
  • Credit Concentration Risk - If banks advance is concentrated say on Iron and Steel sector.
  • Liquidity Risk  - Pillar do not talk about it.
  • Settlement Risk - Failure of counter party bank.
  • Reputation Risk - If affects the bank indirectly through credit, market and/or operational risk.
  • Strategic Risk - Failure of strategies in making profit.


Comments

Post a Comment