Basel Accord

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Basel Accord

Agreement concluded among country representatives in 1988 in Switzerland to develop standardized risk-based capital requirements for banks across countries.

Basel Accord

An agreement on international banking regulations dealing with how banks handle risk. The Basel Accord focuses mainly on credit risk; it divides banks' assets into five categories according to how risky they are. The five categories are assets with no risk, 10% risk, 20%, 50% and 100%. All banks conducting international transactions are required under the Basel Accord to hold assets with no more than 8% aggregated risk. The Accord was promulgated in 1988.Banks in most G-10 countries have implemented it since the early 1990s. It is now considered largely outdated and is in the process of being replaced by Basel II. It is also called Basel I.
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Focusing on ways to enhance the resilience of the banking sector in the UAE, the areas of discussion of the Risk Management Committee have included the Basle Accords, large exposures and risk concentration, and a proposal recommending the UAE to be adopted as a netting jurisdiction.
Lee, The Basle Accords As Soft Law: Strengthening International Banking Supervision, 39 VA.
The Basle Accords have become the standard for international financial services regulations throughout the industrialized world.
Lee, Adoption and Application of a "Soft Law" Banking Supervisory Framework Based on the Current Basle Accords to the Chinese Economic Area, 16 WIS.
The current Basle Accord of 1988,(7) which has been adopted by the G-10 nations(8) and most other industrialized countries,(9) is the subject of Part III, which also details the current regulations and the policy considerations that led to them.
The current capital adequacy regulation is a codified version of the 1988 Basle Accord.
Under the Basle Accord, the general rule is that all banks must maintain a ratio of 8% capital to the total amount of risk-weighted assets and credit-converted OBS items.
The bank must have an 8% ratio or higher to satisfy the standards of the Basle Accord.
Thus, the Basle Accord resulted in an international standard that set a baseline capital cushion for commercial banks, but also provided subscribing nations with a significant degree of discretion to impose additional requirements.
Once the Committee's members agreed on the technical risk-weighted methods forming the Basle Accord, each representative bore the responsibility of incorporating the new standards into the regulations of his home country.
Hong Kong, which has nearly always been an international financial center, adopted the Basle Accord after the Hong Kong Monetary Authority ("HKMA") decided incorporating the new standards would be beneficial to the state.
Second, the Wylie amendment would violate the Basle accords, a global capital standard that puts housing in the higher risk category.