The Basel Accords refer to the banking supervision accords (recommendations on banking regulations) issued by the Basel Committee on Banking Supervision (BCBS).
57-594: Arab Banking Corporation (also called Bank ABC ) is an international bank with headquarters in the Diplomatic Area of Manama, Bahrain . It was incorporated as a joint stock company in 1980 through a special decree by the Amir of Bahrain . It obtained an offshore banking unit licence from the Bahrain Monetary Agency on 7 April 1980, and began operations in the same month. The bank is listed on
114-672: A bank run . The Basel Accords have been integrated into the consolidated Basel Framework , which comprises all of the current and forthcoming standards of the Basel Committee on Banking Supervision. Formerly, the Basel Committee consisted of representatives from central banks and regulatory authorities of the Group of Ten countries plus Luxembourg and Spain . Since 2009, all of the other G-20 major economies are represented, as well as some other major banking locales such as Hong Kong and Singapore . The Committee does not have
171-412: A bank account is considered indispensable by most businesses and individuals. Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account. Banks issue new money when they make loans. In contemporary banking systems, regulators set a minimum level of reserve funds that banks must hold against the deposit liabilities created by
228-445: A fee for that service. In exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the metal they held as a bailee ; these receipts could not be assigned, only the original depositor could collect the stored goods. Gradually the goldsmiths began to lend money out on behalf of the depositor , and promissory notes , which evolved into banknotes, were issued for money deposited as
285-425: A large number of small to medium-sized institutions in its banking system. As of November 2009, China's top four banks have in excess of 67,000 branches ( ICBC :18000+, BOC :12000+, CCB :13000+, ABC :24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches – more than double
342-417: A loan to the goldsmith. Thus, by the 19th century, we find in ordinary cases of deposits, of money with banking corporations, or bankers, the transaction amounts to a mere loan, or mutuum , and the bank is to restore, not the same money, but an equivalent sum, whenever it is demanded and money, when paid into a bank, ceases altogether to be the money of the principal (see Parker v. Marchant, 1 Phillips 360); it
399-535: A portion of their current liabilities. In addition to other regulations intended to ensure liquidity , banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords . Banking in its modern sense evolved in the fourteenth century in the prosperous cities of Renaissance Italy but, in many ways, functioned as a continuation of ideas and concepts of credit and lending that had their roots in
456-492: A revised securitisation framework, and a standardised approach to counterparty credit risk (SA-CCR) to measure exposure to derivative transactions. A specific framework for exposures to central counterparty clearing was introduced. The BCBS also published regulatory standards for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR); In subsequent years, the Basel Committee updated
513-416: A safe and convenient form of money backed by the goldsmith's promise to pay, allowing goldsmiths to advance loans with little risk of default . Thus the goldsmiths of London became the forerunners of banking by creating new money based on credit. The Bank of England originated the permanent issue of banknotes in 1695. The Royal Bank of Scotland established the first overdraft facility in 1728. By
570-399: A variety of different ways including interest, transaction fees and financial advice. Traditionally, the most significant method is via charging interest on the capital it lends out to customers. The bank profits from the difference between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference
627-557: Is Berenberg Bank (founded in 1590). Banking as an archaic activity (or quasi-banking ) is thought to have begun as early as the end of the 4th millennium BCE, to the 3rd millennia BCE. The present era of banking can be traced to medieval and early Renaissance Italy, to the rich cities in the centre and north like Florence , Lucca , Siena , Venice and Genoa . The Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing branches in many other parts of Europe. Giovanni di Bicci de' Medici set up one of
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#1732790533135684-446: Is a bank regulation , which sets a framework within which a bank or depository institution must manage its balance sheet . The categorisation of assets and capital is highly standardised so that it can be risk weighted . After the financial crisis of 2007–2008 , regulators force banks to issue Contingent convertible bonds (CoCos). These are hybrid capital securities that absorb losses in accordance with their contractual terms when
741-400: Is a Bills of Exchange Act that codifies the law in relation to negotiable instruments , including cheques, and this Act contains a statutory definition of the term banker : banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that
798-403: Is a list of the largest deals in history in terms of value with participation from at least one bank: Currently, commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate. Usually, the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to
855-431: Is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle . Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance. In
912-477: Is then the money of the banker, who is bound to return an equivalent, by paying a similar sum to that deposited with him, when he is asked for it. The goldsmith paid interest on deposits. Since the promissory notes were payable on demand, and the advances (loans) to the goldsmith's customers were repayable over a longer time-period, this was an early form of fractional reserve banking . The promissory notes developed into an assignable instrument which could circulate as
969-866: The Bahrain Bourse and its major shareholders are the Central Bank of Libya (59.37%) and Kuwait Investment Authority (40.63%). Its network spreads across 17 countries in the Middle East and North Africa (MENA), Europe, the Americas and Asia. It is expanding its retail banking network in the MENA region. Bank ABC is a provider of trade finance, treasury, project and structured finance, syndication, corporate and institutional banking as well as Islamic banking services. By April 1981, US$ 750 million had been fully paid by Bank ABC's original three shareholders:
1026-472: The Basel Capital Accord , which was published in 1988 and covered capital requirements for credit risk . The Accord was enforced by law in the Group of Ten (G-10) countries in 1992. The Basel Accord was augmented in 1996 with a framework for market risk , which included both a standardised approach and a modelled approach, the latter based on value at risk . Published in 2004, Basel II
1083-742: The Federal Deposit Insurance Corporation (FDIC) as a regulator. However, for soundness examinations (i.e., whether a bank is operating in a sound manner), the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for national banks. State non-member banks are examined by the state agencies as well as
1140-651: The Great Depression , the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the sub-prime mortgage crisis in the 2000s. The 2023 global banking crisis is the latest of these crises: In March 2023, liquidity shortages and bank insolvencies led to three bank failures in the United States , and within two weeks, several of the world's largest banks failed or were shut down by regulators Assets of
1197-507: The Group of Ten (G-10) countries in 1992. A new set of rules known as Basel II was developed and published in 2004 to supersede the Basel I accords. Basel III was a set of enhancements to in response to the financial crisis of 2007–2008 . It does not supersede either Basel I or II but focuses on reforms to the Basel II framework to address specific issues, including related to the risk of
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#17327905331351254-569: The Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths. The definition of a bank varies from country to country. See the relevant country pages for more information. Under English common law , a banker is defined as a person who carries on the business of banking by conducting current accounts for their customers, paying cheques drawn on them and also collecting cheques for their customers. In most common law jurisdictions there
1311-735: The ancient world . In the history of banking , a number of banking dynasties – notably, the Medicis , the Pazzi , the Fuggers , the Welsers , the Berenbergs , and the Rothschilds – have played a central role over many centuries. The oldest existing retail bank is Banca Monte dei Paschi di Siena (founded in 1472), while the oldest existing merchant bank
1368-456: The financial crisis of 2007–2008 , the Basel III reforms were published in 2010/11. The standards set new definitions of capital, higher capital ratio requirements, and a leverage ratio requirement as a "back stop" measure. Risk-based capital requirements (RWAs) for CVA risk and interest rate risk in the banking book were introduced for the first time, along with a large exposures framework,
1425-481: The 15,000 branches in the United Kingdom. Between 1985 and 2018 banks engaged in around 28,798 mergers or acquisitions, either as the acquirer or the target company. The overall known value of these deals cumulates to around 5,169 bil. USD. In terms of value, there have been two major waves (1999 and 2007) which both peaked at around 460 bil. USD followed by a steep decline (−82% from 2007 until 2018). Here
1482-588: The EGM, Bank ABC obtained the shareholders' approval for an issuance of US$ 390 million in AT1 securities, which will increase the Bank's Tier 1 capital ratio by approximately 130 basis points, taking it back above 17%. Additionally, the Bank obtained the shareholders' approval to increase its authorized share capital from US$ 3.5 billion to US$ 4.5 billion. Bank A bank is a financial institution that accepts deposits from
1539-529: The FDIC. National banks have one primary regulator – the OCC. Each regulatory agency has its own set of rules and regulations to which banks and thrifts must adhere. The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal inter-agency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although
1596-470: The FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing. Basel Accords Basel I was developed through deliberations among central bankers from major countries. In 1988, the Basel Committee published a set of minimum capital requirements for banks. This is also known as the 1988 Basel Accord, and was enforced by law in
1653-952: The Ministry of Finance of Kuwait (whose shares have since been transferred to the Kuwait Investment Authority), the Libyan Secretariat of Treasury (whose shares were later transferred to the Central Bank of Libya) and the Abu Dhabi Investment Authority . At the end of 1989, ABC's authorised share capital was increased to US$ 1.50 billion and in June 1990, paid-up capital was raised to US$ 1.00 billion through an international share offering. In June 2006, ABC's shares were split 10 for 1 in order to boost trading activities by placing them in
1710-586: The UK, for example, the Financial Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland ) issue their own banknotes in addition to those issued by the Bank of England , the UK government's central bank. Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer – defined as any entity for which
1767-550: The authority to enforce recommendations, although most member countries as well as some other countries tend to implement the Committee's policies. This means that recommendations are enforced through national (or EU -wide) laws and regulations, rather than as a result of the committee's recommendations - thus some time may pass and, potentially, some unilateral changes may be made, between the international recommendations for minimum standards being agreed and implementation as law at
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1824-639: The bank agrees to conduct an account. The law implies rights and obligations into this relationship as follows: These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms or create new rights, obligations, or limitations relevant to the bank-customer relationship. Some types of financial institutions, such as building societies and credit unions , may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules. The requirements for
1881-411: The bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans). Banking crises have developed many times throughout history when one or more risks have emerged for the banking sector as a whole. Prominent examples include the bank run that occurred during
1938-667: The bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transfer , EFTPOS , and automated teller machines (ATMs). Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits , and by issuing debt securities such as banknotes and bonds . Banks lend money by making advances to customers on current accounts, by making installment loans , and by investing in marketable debt securities and other forms of money lending. Banks provide different payment services, and
1995-717: The beginning of the 19th century Lubbock's Bank had established a bankers' clearing house in London to allow multiple banks to clear transactions. The Rothschilds pioneered international finance on a large scale, financing the purchase of shares in the Suez canal for the British government in 1875. The word bank was taken into Middle English from Middle French banque , from Old Italian banco , meaning "table", from Old High German banc, bank "bench, counter". Benches were used as makeshift desks or exchange counters during
2052-515: The business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purpose of regulating and supervising banks rather than regulating the actual business of banking. However, in many cases, the statutory definition closely mirrors the common law one. Examples of statutory definitions: Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking ,
2109-533: The capital of the issuing bank falls below a certain level. Then debt is reduced and bank capitalisation gets a boost. Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirement. The economic functions of banks include: Banks are susceptible to many forms of risk which have triggered occasional systemic crises. These include liquidity risk (where many depositors may request withdrawals in excess of available funds), credit risk (the chance that those who owe money to
2166-415: The changes are substantial enough to warrant that title and the Basel Committee refer to only three Basel Accords. These new standards came into effect on 1 January 2023, although national implementation of the standards is generally running behind this schedule and still ongoing. The framework's approach to risk which is based on risk weights derived from the past was criticised for failing to account for
2223-483: The cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques . Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers in
2280-617: The commemoration of its 35th anniversary. The change to a single, unifying global brand name and corporate identity took effect on 15 June 2015 across the Bank's global network spanning 18 countries in the Middle East and North Africa (MENA), Europe, the Americas and Asia (with the exception of its subsidiary in Brazil, which will keep its own identity as Banco ABC Brasil). The legal names of the Arab Banking Corporation and its subsidiaries did not change. In March 2022, during
2337-423: The cross-selling of complementary products. Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold. Bank capital consists principally of equity , retained earnings and subordinated debt . Some of the main risks faced by banks include: The capital requirement
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2394-408: The customer's order – although money lending, by itself, is generally not included in the definition. Unlike most other regulated industries, the regulator is typically also a participant in the market, being either publicly or privately governed central bank . Central banks also typically have a monopoly on the business of issuing banknotes . However, in some countries, this is not the case. In
2451-589: The funding of these loans, in order to ensure that the banks can meet demands for payment of such deposits. These reserves can be acquired through the acceptance of new deposits, sale of other assets, or borrowing from other banks including the central bank. Activities undertaken by banks include personal banking , corporate banking , investment banking , private banking , transaction banking , insurance , consumer finance , trade finance and other related. Banks offer many different channels to access their banking and other services: A bank can generate revenue in
2508-442: The issue of a bank license vary between jurisdictions but typically include: Banks' activities can be divided into: Most banks are profit-making, private enterprises. However, some are owned by the government, or are non-profit organisations . The United States banking industry is one of the most heavily regulated and guarded in the world, with multiple specialised and focused regulators. All banks with FDIC-insured deposits have
2565-409: The largest 1,000 banks in the world grew by 6.8% in the 2008–2009 financial year to a record US$ 96.4 trillion while profits declined by 85% to US$ 115 billion. Growth in assets in adverse market conditions was largely a result of recapitalisation. EU banks held the largest share of the total, 56% in 2008–2009, down from 61% in the previous year. Asian banks' share increased from 12% to 14% during
2622-450: The legal basis for bank transactions such as cheques does not depend on how the bank is structured or regulated. The business of banking is in many common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business . When looking at these definitions it is important to keep in mind that they are defining
2679-593: The more conservative approach for the bank. Because of this it was anticipated that only the few very largest US banks would operate under the Basel II rules, the others being regulated under the Basel I framework. However Basel II standards were criticised by some for allowing banks to take on too much risk with too little capital. This was considered part of the cause of the US subprime mortgage crisis , which started in 2008. The Basel 2.5 revisions introduced stressed VaR and IRC for modelled market risk in 2009-10. Following
2736-487: The most famous Italian banks, the Medici Bank , in 1397. The Republic of Genoa founded the earliest-known state deposit bank, and Banco di San Giorgio (Bank of St. George), in 1407 at Genoa , Italy. Fractional reserve banking and the issue of banknotes emerged in the 17th and 18th centuries. Merchants started to store their gold with the goldsmiths of London , who possessed private vaults , and who charged
2793-619: The national level. The regulatory standards published by the committee are commonly known as Basel Accords. They are called the Basel Accords as the BCBS maintains its secretariat at the Bank for International Settlements in Basel , Switzerland and the committee normally meets there. The Basel Accords is a set of recommendations for regulations in the banking industry . Deliberations by central bankers from major countries resulted in
2850-455: The past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions. This helps in making a profit and facilitates economic development as a whole. Recently, as banks have been faced with pressure from fintechs, new and additional business models have been suggested such as freemium, monetisation of data, white-labeling of banking and payment applications, or
2907-479: The public and creates a demand deposit while simultaneously making loans . Lending activities can be directly performed by the bank or indirectly through capital markets . Whereas banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Most countries have institutionalized a system known as fractional-reserve banking , under which banks hold liquid assets equal to only
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#17327905331352964-541: The same range as other shares quoted on the Bahrain Bourse. At an Extraordinary General Meeting held in April 2008, ABC's shareholders approved an increase in the authorized capital of the bank from US$ 1.5 billion to US$ 2.5 billion and an increase in issued and paid up capital from US$ 1.0 billion to US$ 2.0 billion by way of a priority rights share offering to existing shareholders. Another Extraordinary General Meeting
3021-466: The standards for market risk, based on a “ Fundamental Review of the Trading Book ” (FRTB). In addition, further reforms of the framework were published by the Basel Committee in 2017 under the title Basel III: Finalising post-crisis reforms . These reforms were sometimes referred to as "Basel IV". However, the secretary general of the Basel Committee said, in a 2016 speech, that he did not believe
3078-543: The uncertainty in the future. A recent OECD study suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced adverse systemic shocks that materialised during the financial crisis. According to the study, capital regulation based on risk-weighted assets encourages innovation designed to circumvent regulatory requirements and shifts banks' focus away from their core economic functions. Tighter capital requirements based on risk-weighted assets, introduced in
3135-414: The year, while the share of US banks increased from 11% to 13%. Fee revenue generated by global investment in banking totalled US$ 66.3 billion in 2009, up 12% on the previous year. The United States has the most banks in the world in terms of institutions (5,330 as of 2015) and possibly branches (81,607 as of 2015). This is an indicator of the geography and regulatory structure of the US, resulting in
3192-432: Was a new capital framework to supersede the Basel I framework. It introduced "three pillars": Capital requirements for operational risk were introduced for the first time. The ratio of equity and credit is 8% under Basel II. The standards were revised several times during subsequent years. Bank regulators in the United States took the position of requiring a bank to follow the set of rules (Basel I or Basel II) giving
3249-630: Was held on January 28, 2010, to approve an increase in the authorized capital from US$ 2.5 billion to US$ 3.5 billion and an increase in issued and paid up capital from US$ 2.0 billion to US$ 3.11 billion by way of a priority rights share offering to existing shareholders. In December 2010, the Central Bank of Libya acquired the 17.72% shareholding of Abu Dhabi Investment Authority in ABC, increasing its stake to 59.37%. In June 2015 Arab Banking Corporation revamped its corporate identity and changed its brand name to Bank ABC. The bank's new identity launch coincides with
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