Overview of the Basel Capital Adequacy Framework
Abstract
This paper examines Capital Adequacy Framework that specifies the approaches for quantifying the Risk-
Weighted Assets (RWA) for credit risk, market risk and operational risk. The computation of the risk-weighted assets is
consistent with Pillar 1 requirements set out by the Basel Committee on Banking Supervision (BCBS) and the Islamic
Financial Services Board (IFSB) in their respective documents - “International Convergence of Capital Measurement and
Capital Standards: A Revised Framework” issued in June 2006 and the “Capital Adequacy Standard (CAS)” issued in
December 2005. While the Bank believes that such customization could be justified, a pragmatic approach is adopted for
implementation. Higher prudential requirements and risk management standards would be introduced gradually taking into
consideration industry feedback during the consultation process.