Disclosures Prescribed by RBI Under Basel-III

The Reserve Bank of India (RBI) has implemented Basel III norms to enhance the resilience of the banking sector and improve risk management practices. These norms outline specific disclosure requirements for banks to ensure transparency and promote sound risk management. Here’s a detailed overview of the disclosures prescribed by RBI under Basel III:

  1. Capital Adequacy Disclosures:a. Common Equity Tier 1 (CET1), Tier 1, and Total Capital Ratios:
    • Disclosure of the bank’s capital adequacy ratios, including CET1, Tier 1, and Total Capital ratios, as per regulatory requirements.
    b. Capital Composition:
    • Breakdown of capital components, including CET1 capital, Additional Tier 1 (AT1) capital, and Tier 2 capital.
    c. Regulatory Adjustments:
    • Explanation of adjustments made to regulatory capital, such as deductions and adjustments to CET1 and Tier 1 capital.
    d. Capital Buffers:
    • Disclosure of capital conservation buffer and countercyclical buffer requirements.
  2. Risk Exposure Disclosures:a. Credit Risk:
    • Disclosure of the composition and quality of loan portfolios, non-performing assets, and provisioning levels.
    b. Market Risk:
    • Details of the bank’s exposure to market risk, including interest rate risk and foreign exchange risk.
    c. Operational Risk:
    • Explanation of the bank’s operational risk management framework and key operational risk events.
    d. Counterparty Credit Risk:
    • Disclosure of exposures to counterparty credit risk arising from derivatives, securities financing transactions, and other transactions.
  3. Liquidity Risk Disclosures:a. Liquidity Coverage Ratio (LCR):
    • Disclosure of LCR components, including high-quality liquid assets (HQLA) and net cash outflows.
    b. Net Stable Funding Ratio (NSFR):
    • Explanation of the NSFR, detailing available stable funding and required stable funding.
  4. Asset Encumbrance Disclosures:a. Asset Encumbrance:
    • Details of asset encumbrance, including the percentage of encumbered assets relative to total assets.
  5. Credit Risk Mitigation Disclosures:a. Collateral and Guarantees:
    • Disclosure of collateral received and granted, including details of assets pledged and related counterparty exposures.
    b. Guarantees and Credit Derivatives:
    • Explanation of guarantees and credit derivatives used for credit risk mitigation purposes.
  6. Other Disclosures:a. Pillar 3 Disclosures:
    • Provision of comprehensive Pillar 3 disclosures, including qualitative and quantitative information on risk exposures, capital, and risk management practices.
    b. Related Party Transactions:
    • Details of related party transactions, including nature, terms, and amounts involved.
    c. Interest Rate Risk in the Banking Book (IRRBB):
    • Disclosure of the bank’s interest rate risk profile and management practices.
    d. Stress Testing and Scenario Analysis:
    • Explanation of stress testing methodologies, scenarios used, and the potential impact on capital and risk exposures.
    e. Remuneration:
    • Disclosure of the bank’s remuneration policies and practices for key management personnel and employees.

These disclosure requirements are designed to provide stakeholders with a comprehensive understanding of a bank’s capital adequacy, risk exposures, liquidity position, and risk management practices. By ensuring transparency and consistency in reporting, these disclosures contribute to the overall stability and resilience of the banking sector. It’s important for banks to comply with these requirements and provide accurate and timely information to regulators and the public.