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Basel II

The Monetary Authority of Singapore (MAS) released Basel II rules in Singapore on December 14 2007.

Basel II was established by the Basel Committee on Banking Supervision in June 2004, aiming to enhance the soundness and stability of the banking system by aligning the minimum regulatory capital requirements closely to the risks that banks face.

The Basel II framework comprises three pillars. Pillar 1 prescribes rules relating to how banks should calculate the minimum capital that they are required to hold for credit, market and operational risks; pillar 2 describes the necessary accompanying supervisory review of a bank's internal capital adequacy assessment; and pillar 3 prescribes minimum disclosure to facilitate market discipline.

Basel II was implemented following a three-year extensive industry and public consultation, which began in 2004. The sixth and final phase of consultation was concluded in October 2007. In addition, MAS participated in an industry working-group formed to develop requirements for disclosure and regulatory reporting under Basel II. These processes allow the industry to be closely involved from the early stages of policy formulation.

MAS' Basel II Rules will apply to all Singapore-incorporated banks. In contrast to a number of other jurisdictions, MAS does not intend to require banks to adopt specific approaches from among those that are available under pillar 1, but expects each bank to adopt the approaches that are commensurate with its risk profile.

For full details on MAS' Basel II Rules and MAS' responses to the consultation feedback, please visit MAS' website at http://www.mas.gov.sg/fin_development/banking/Basel_II.html.

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