Page 44 - Azerbaijan State University of Economics

Nigar Huseynlı: Basel Standards And Theır Applıcatıon

One of the most important principles of Basel - 2 is that risk management is organized

in a multi-focused way, not a single focus. Such that, when banks or credit institutions
have to give a commercial loan to a customer, they will include the customer in one
of the SME, Retail SME or Corporate SME categories. In doing so, the ratings given
by the rating agencies will be taken into account. According to the ratings of the
rating agencies, it will be determined whether the customer can get a loan or at what
cost. Therefore, the basic principle of Basel - 2 is that crediting can be applied
differently depending on the customer's own particular situation.

Basel - 2 is an important opportunity to develop effective risk management and
market discipline in banks, to increase the efficiency of capital adequacy measures,
thereby creating a sound and efficient banking system and contributing to financial
stability.

It is an important missed opportunity. There are provisions in Basel-2 on how to
calculate the capital requirement, how to manage the risks exposed, how to evaluate
the capital adequacy and how to disclose it to the public.

In Basel-2, there are standard methods based on simple arithmetic for risk
measurement, as well as a method that includes statistical / mathematical risk
measurement methods related to credit, market and operational risk.

BASEL III STANDARDS
After each economic crisis, new searches are made in order to prevent it from
happening again, and the previous ones are reviewed and the deficiencies are tried to
be completed. After the last global crisis, Basel III consensus was prepared by the
Basel Committee in order to eliminate the deficiencies of the Basel II consensus,
which was developed and implemented before, to introduce new approaches and
measures, thus to try to prevent possible crises or to minimize the damage (Ersoy,
2011).

The financial crisis of 2007/2008 revealed the management deficiencies in the
banking sector. A new regulation has been introduced to protect against these
unpredictable results. A new framework has been created for the new banking
regulation called Basel III. In this context, it was emphasized that banks should
increase their capital amounts, concepts such as liquidity and leverage ratios were
included in the regulation (Şahin, 2013).

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