Cyber Times International Journal of Technology & Management

Basel II an attempt to reduce the number of bank failures by trying a bank’s Capital Adequacy Ratio to the riskiness of the loans it makes. For instance, there is less chance of a loan to a government going bad than a loan to say, an Internet business, so the bank should not have to hold as much capital in reserve against the firm loan as against the second. Banks in the process of financial intermediation are confronted with various kinds of financial and non-financial risks viz., credit, interest rate, foreign exchange rate, liquidity, equity price, commodity price, legal, regulatory, reputational, operational, etc. These risks are highly interdependent and events that affect one area of risk can have ramifications for a range of other risk categories. The aim of the paper is to cover Basel II & III norm and banking requirement for risk management. In the era of globalization banking sector is exposed to risk at international levels. They need to manage risks taking care of globalised rick policies. Basel II & III lays down guidelines for determining the minimum solvency requirements for banks. The main change in these guidelines is a new system for weighting the risks run by banks in their loans to retail and corporate customers. Ultimately, the objective of Basel II is to improve the soundness of the financial system.