Basel Accord

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Topics: Banking
Basel Accords
Basel II and beyond: Current status across the world.

Table of Contents

Introduction 2 Need for the study 2 The Need for Regulation 2 Goals and Tools for Bank Regulation and Supervision 3 The Basel I Accord 4 Basel Committee on Banking Supervision (BCBS) 4 1988 Basel Accord 5 1996 Amendment to include Market Risk 6 Salient Features 6 Evolution of Basel Committee Initiatives 6 The New Accord (Basel II) 7 The Need for Basel II 8 PILLAR I: Minimum Capital Requirements 8 Credit Risk 9 Operational Risk 11 PILLAR 2: Supervisory Review Process 12 Pillar 3: Market Discipline 13 Criticism of Basel II 13 Challenges for developing countries 16 Standardized Approach-related 16 IRB Approach-related 17 Policy Implications 18 Global survey by Financial Stability Institute (FSI) 19 Impact of the financial crisis on Basel II implementation plans 19 Global results of the survey 20 Basel II in China and India 21 Bibliography 22 Annexure 23 Various Risks 23 Liquidity Risk 23

Introduction

The Basel Accords refer to the banking supervision Accords (recommendations on banking laws and regulations) -- Basel I and Basel II issued and Basel III under development -- by the Basel Committee on Banking Supervision (BCBS). They are called the Basel Accords as the BCBS maintains its secretariat at the Bank of International Settlements in Basel, Switzerland and the committee normally meets there.

The Basel I Capital Accord, published in 1988, represented a major breakthrough in the international convergence of supervisory regulations concerning capital adequacy. Its main objectives were to promote the soundness and stability of the international banking system and to ensure a level playing field for internationally active banks. Even though it was originally intended solely for internationally active banks in G-10 countries, it was eventually recognized as a global standard and adopted by over 120 countries

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