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 It is now considered largely outdated and is in the process of being replaced by Basel II.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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International standards for banking capital requirements are developed by the Basel Committee on Banking Supervision (BCBS) and are known as the Basel Capital Accords.
Basel III strengthens the minimum standards for the quality and quantity of banks' capital, and aims to reduce bank leverage and improve the risk coverage of the Basel Capital Accords.
The Basel Capital Accords require a bank to maintain a minimum amount of capital in relation to its risk-weighted exposures (box 2).
In the wake of the Global Financial Crisis (GFC) it became apparent that there were some shortcomings in the Basel Capital Accord in place at the time, known as Basel II.
Contents Overview of Capital Adequacy Regulation The Basel Capital Accords Enhanced Safety and Soundness Requirements Under Dodd-Frank Removal of References to Credit Ratings Section 171: The Collins Amendment U.
The safety and soundness regulatory framework for banking institutions that stems from the Basel Capital Accords include
The objective of the first Basel Capital Accord was to promote consistent safety and soundness standards while providing an equitable basis of competition for banking institutions in participating countries.
The FSI asked for the seminar in support of the new Basel Capital Accords, which will require additional capital requirements for loans primarily secured by real estate.
A good starting point for their examination is the FSB Compendium of financial standards, even though the effectiveness of global regulation is strictly linked with the implementation of more specific rules, such as the Basel capital accord, the IOSCO Code of conduct for Credit rating agencies and the FSB recommendations about derivatives and systemically important financial institutions (SIFI).
This model of implementation was used already with the Basel capital accord of 1988 (89), and is still used for most BCBS' and IOSCO's standards.