Discussion
Which one is not the part of Migration to new capital adequacy framework based on the three pillar approach namely?
Answer: D
Correct answer: Book keeping
Book keeping is not one of the three pillars. The Basel II framework, on which India's revised capital adequacy regime was based, rests on minimum capital requirements, supervisory review and market discipline.
The first sets the capital a bank must hold against credit, market and operational risk. The second requires supervisors to assess whether a bank's own capital assessment is adequate for its risk profile. The third obliges disclosure sufficient for the market to form its own judgement. Book keeping is an accounting function that underlies all three but is not a pillar of the framework.
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