Business Streams
Basel II - Pillar 3 – Disclosure Documents
The Three Pillars of Basel II
In June 2004, the Basel Committee on Banking Supervision (BCBS) published the International Convergence of Capital Measurement and Capital Standards: a Revised Framework (Basel II).
This framework was designed to replace the 1988 Accord, which, since publication, had provided the basis for assessing the capital adequacy of supervised institutions by prudential regulators worldwide.
Compared with the original Accord, the revised framework is more risk-sensitive and takes into account banks’ own risk management practices. Regulators recognise that strong risk management systems and practices contribute to the stability of individual institutions and that they play an important role in enhancing the overall soundness and stability of the banking sector.
Basel II differentiates between three “pillars”, which are expected to be mutually reinforcing:
Pillar 1 is centred on the capital requirements related to the credit, market and operational risks that banks run.
Under Pillar 2, banks are expected to perform their own assessment of capital adequacy, based on the risks that they face in their activities, including additional risk types such as interest rate risk on the banking book and liquidity risk. Pillar 2 also lays out the interaction between the banks’ own assessments and the dedicated supervision of the banking regulators.
Pillar 3 aims to promote market discipline through the disclosure of risk information by institutions.
The requirements expressed in the Basel II framework have been incorporated into European and national regulations.
These publications contain LCH.Clearnet’s consolidated Pillar 3 disclosure for 2010.
