The Nexus between conventional Basel frameworks and financial instability mitigation prerequisites

Abstract

This article discusses theoretically the notion of risk stemming from the financial sector with a perspective closely linked to criteria involving various financial stability related aspects of risk.

It reinvigorates the conventional Basel framework in its second third and fourth versions by attempting to elucidate their shortcomings afferent to their purview and scope and tries to complement them by enunciating the requirement of setting a prudential framework that tackles the issue of financial instability emanating from the stock market for the scope of going deeper inside the fundamentals of risk stemming from the Stock market and a thorough early warning approach dealing with the issue of the hindrance of time reaction mismatch of the prudential authority and hence the priority of setting a long run forwarded guided prudential surveillance methodology to avoid the surprise effect of unforecasted events that might erupt abruptly for the purview of the scope of predicting forthcoming risks in advance.

The early warning purview unveils the requirement of ensuring in advance resilience from the onslaught of financial crises for the sake of annihilating threats to financial stability over the long run and reveals to be the best initiative to take in order to solve the contingency of having to deal with unexpected risks that might arise abruptly and should have been dealt with in advance as time reaction simultaneous to actual occurrence of hindrances is not affordable.