I didn’t know what “Basel” means, when the first time I heard about it in one of the workshops in 2008 about Basel Committee. Before I completely comprehend the purpose of the workshop, I became interested to know the meaning of “Basel”. Finally, I found from one of the sources that, Basel is Switzerland’s third-most-populous city (after Zürich and Geneva) with about 175,000 inhabitants. I really laughed at myself about my general knowledge.
In 1974 the Basel Committee was formed as the Committee on Banking Regulations and Supervisory Practices by the central-bank Governors of the Group of Ten countries, such as Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States.
Basel committee came into existence to strengthen the regulation, supervision, and practices of banks worldwide with the purpose of enhancing financial stability.
The coronavirus (Covid-19) pandemic is a major disruptive event for the global economy. It is revealing financial vulnerabilities and testing the post-financial crisis economic system. Central banks and international financial institutions are seeking to mitigate the immediate impact on the real economy through extraordinary fiscal, monetary, and macro prudential measures.
With no doubt Oman has too affected like other countries of the world, economically during pandemic. The net profit of most Banking sectors and other financial institutions declined due to the corona virus (covid-19) crises.
It was evident that branches of many commercial banks in Oman had been shut down for a week or more due to corona virus, which means reduction of banking transactions for those days. It was difficult for banks to approach new customers for new deposits. Once the banks face liquidity risk, that will indicate instability in banking sectors. Banks are depending on liquidity and its proper management.
On the other hands, several new rules and regulations came from Central banks on interest rates and tenor on credit. The debit collection was one of the challenges for banks as many customers lost their jobs and the salaries of some customers either been delayed or reduced.
Basel (1-2 & 3) has been designed in a way to guide banking sectors to become stable in the time of financial crises. It is then, upon the banks how the Basel committee’s framework, guidelines implemented. It is must for the Banks to assure their Risk Management policies are in place to safeguard the assets.
Union Banks of Arabs has many times organized workshop and training programs in Oman on Basel 3 on liquidity risk. What are those Basel Committee’s 3 principles, then? Those three principles emphasized on capital requirement, leverage ratio and liquidity requirement.
In spite, banking transactions has affected a little, but banks were doing fine too because of understanding and implementing the principles of Basel 3. This mean that the role of Basel Committee in supervising banks is always seems effective.