Nepal Rastra Bank (NRB) has said that it would start implementing  Basel III norms on the country’s commercial banks starting from mid-July 2016.

 In a new capital adequacy framework released by the NRB, it will start implementing the capital ration from mid-July 2016 and fully implement it by July 2019.

 “In order to ensure smooth migration to Basel III without aggravating any near term stress, appropriate transitional arrangements have been made,” states the framework. The framework has given more importance to the conservation buffer capital than the capital adequacy ratio.  

As per the new arrangement, CAR will be brought down gradually to 8.5 percent  in mid-July 2019 from the current 10 percent while the buffer capital will be increased from the current one percent to 2.5 percent during the period.

“The new arrangements have been made as per the standards set by the Basel III,” said  Trilochan Pangeni, spokesperson of NRB.

 “The buffer capital has been given focus because it should be maintained by deducting from their profit and it is a more reliable measure against risks,” he said.

Before implementing the framework, the NRB will conduct a parallel exercise of implementing  framework from mid-January  until mid-July.

 The banks are required to submit their capital adequacy report to the Bank’s Supervision Department on a monthly basis.  Based on the findings of the parallel run, further amendments  and modification will be incorporated in the framework wherever deemed necessary, the NRB said.