Overview of Basel Accord

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  • Topic: Basel II, Banking, Bank
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  • Published : April 8, 2013
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Overview of Basel Accord

The Basel Accord refer to the banking supervision Accords, it is agreed by the Basel Committee on Banking Supervision (BCBS) in 1988. The Committee was established in a Cologne -based bank (Herstatt Bank) in 1974. The committee does not have the right to enforce advice, even though most of the members’ countries and some other countries tend to executive committee policy. It means that measures through the country (or the European Union) laws and regulations, rather than the commission proposal, so some time may through the advice and implementation between as a law at the national level. The Basel Accord is including Basel I, Basel II and Basel III. (FSA, 2013)

The Basel I is published a set of minimum capital requirements for banks in 1988; it was by the law enforcement in the Group of Ten (G-10) countries in 1992. However, it was thought as out of date in generally. In fact, the world has changed as financial innovation and financial group risk management development. (FSA, 2013)

Therefore, Basel II was the second of the Basel Accords, it issued as a more comprehensive regulations during the implementation by several countries in 2004. The purpose of Basel II is to establish an international standard for banking regulators to control how much capital Banks need to put on guard against operational risk types of financial and banking face of the whole economy. In fact, the Basel II was trying to achieve the target by establishing risk and capital management requirements, in order to ensure that Banks have enough capital risk exposure through its own bank loans and investment practice. Therefore, these rules means more risk on the bank exposure, the amount of capital of Banks need to maintain the solvency and the overall economic stability in a general way. (FSA, 2013)

Moreover, the Basel III was developed in dealing with the financial crisis; it was the latest development of the implementation. The financial market crisis in...
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