From Basel I to Basel II to Basel III

Pushpkant Shakdwipee, Masuma Mehta

The financial system of a country is of immense use and plays a vital role in shaping the economic development for a nation. It consists of financial intermediaries and financial markets which channels funds from those who have savings to those who have more productive use for them, in a way leading to money creation. The volume and growth of the capital in the economy solely depends on the efficiency and intensity of the operations and activities carried out in the financial markets. One of the most important functions of the financial system is to share risk which is catered mainly by the banking sector. (Cortez, 2011) Banks are betting that the individuals and companies to whom they lend capital will earn enough money to pay back their loans. This process leads to generation of Risk and in turn necessitates Regulations.