Banking Failures and the Basel Steel Framework

What happens when banks fail? What occurs when collateral is damaged? Who do you hold responsible when financial institutions experience liquidity? These are the basic questions that could boggle the mind and have been posed since the inception of an organised system that collects deposits from people, saves them and gives loans. Banks are the central pillars of the modern economy. Whatever happens to an individual bank in a county will inadvertently spill over to the country's financial system, thus affecting other banks and altering their economic outlook. Bank failure escalates into a financial and economic crisis that causes loss of public confidence in the system, negative multiplier effects, unemployment, disruption in the payment system and monetary contraction and so on. There will be a generally saturated economic atmosphere of panic and stagnancy to justify the idiom that claims that ‘money makes the world go round’.

This unfortunate situation of failing banking systems has extended over the years, with over 4000 banks failing since the 1930s. World wars, pandemic lockdowns and political meltdowns have caused banks to have more liabilities than assets, thus plunging them into closures. This can result in economic recessions and depression if banks do not take mitigation measures. It starts with a bank's balance sheet with more borrowing services than deposits and reserves to sort customers should they want to withdraw their deposits in a chaotic time. Customers' erratic behaviour causes a 'bank run' until it becomes insolvent. This course will teach you the other causes of a bank's failure and the effects of systematic risk.

There is a need to regulate the banking sector to quell the economic crisis and gain financial stability with a systematic approach that incorporates all the bank's vulnerability hot spots. This prompted leading nations' central bank governors to converge in the northern Swiss city of Basel to establish the Bank for International Settlement (BIS) and Basel Committee on Banking Supervision (BCBS) as organisations that formulate policies to prevent bank failures and financial crises. They have since convened several times to effect the Basel 1, 2, 3 and 4 strategic moves to bring more guidelines for measuring risks and quality of capital. This course will explore the intervention strategies of the BIS and BCBS in achieving every bank's minimum capital adequacy ratio and how they handle credit, market and operational risks. This module is rich in calculations of CLR, NSFR and all other intervention measures to bring stability to banking and confidence in financial institutions to the people. Why wait? Enrol now and understand bank finances!