ICICI Bank 2012 Annual Report Download - page 176

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the capital adequacy position of the banking subsidiaries and the significant non-banking subsidiaries based on
the respective host regulatory requirements is also reported to the Board. In line with the RBI requirements for
consolidated prudential report, the capital adequacy position of the ICICI Group (consolidated) is reported to the
Board on a half-yearly basis.
Further, the ICAAP which is an annual process also serves as a mechanism for the Board to assess and monitor the
Bank’s and the Group’s capital adequacy position over a four year time horizon.
Capital adequacy of the subsidiaries
Each subsidiary in the Group assesses the adequate level of capitalisation required to meet its respective host
regulatory requirements and business needs. The Board of each subsidiary maintains oversight over the capital
adequacy framework for the subsidiary either directly or through separately constituted committees.
Basel III
In order to strengthen the resilience of the banking sector to potential future shocks, together with ensuring adequate
liquidity in the banking system, the Basel Committee on Banking Supervision (BCBS) issued the Basel III proposals
on December 17, 2009. Following a consultation phase on these proposals, the final set of Basel III rules were issued
on December 16, 2010. The Basel III rules on capital consist of measures on improving the quality, consistency
and transparency of capital, enhancing risk coverage, introducing a supplementary leverage ratio, reducing
procyclicality and promoting countercyclical buffers, and addressing systemic risk and interconnectedness. The
Basel III rules on liquidity consist of a measure of short-term liquidity coverage ratio aimed at building liquidity
buffers to meet stress situations and a measure of long-term net stable funding ratio aimed at promoting longer
term structural funding. BCBS has stipulated a phased implementation of the Basel III framework between January
1, 2013 and January 1, 2019.
On May 2, 2012, RBI issued the final guidelines on the Basel III capital regulations. We continue to monitor
developments on the Basel III framework and believe that our current robust capital adequacy position, adequate
headroom currently available to raise hybrid/debt capital and demonstrated track record of access to domestic and
overseas markets for capital raising will enable us to adapt to the Basel III framework. RBI issued the draft guidelines
on Basel III liquidity standards on February 21, 2012 and solicited feedback from the industry on these guidelines.
The final guidelines on Basel III liquidity standards are awaited from RBI.
b. Capital requirements for various risk areas (March 31, 2012)
As required by RBI guidelines on Basel II, the Bank’s capital requirements have been computed using the
Standardised approach for credit risk, Standardised Duration method for market risk and Basic Indicator approach
for operational risk. The minimum capital required to be held at 9.00% for credit, market and operational risks is
given below:
` in billion
Amount1
I. Capital required for credit risk 339.19
- for portfolio subject to standardised approach 338.08
- for securitisation exposure 1.11
II. Capital required for market risk 31.96
- for interest rate risk2 26.06
- for foreign exchange (including gold) risk 0.87
- for equity position risk 5.03
III. Capital required for operational risk 26.19
Total capital requirement (I+II+III) 397.34
Total capital funds of the Bank 865.19
Total risk weighted assets 4,414.88
Capital adequacy ratio 19.60%
1. Includes all entities considered for Basel II capital adequacy computation.
2. Includes capital required of ` 0.22 billion for securitisation exposure.
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2012