Basel Accord Case

Content

1. Introduction _______________________________________________________________________________________________________ 1 2. Basel I Accord _____________________________________________________________________________________________________ 2
2.1 Introduction of Basel I ___________________________________________________________________________________________ 2
2.2 Criticism on Basel I ______________________________________________________________________________________________ 3
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3. Basel II Accord ____________________________________________________________________________________________________ 3
3.1 First pillar: Augments Basel I ___________________________________________________________________________________ 3
3.1.1 Standardized approach ___________________________________________________________________________________________________ 4
3.1.2 The Internal Ratings‐Based approaches: Foundation (FIRB) and Advanced (AIRB) ________________________________ 4
3.2 Pillar 2 and Pillar 3 ______________________________________________________________________________________________ 5
3.3 Criticism on Basel II ______________________________________________________________________________________________ 5

4. Basel III Accord ___________________________________________________________________________________________________ 5
4.1 Financial crisis and motivation for Basel III reform ________________________________________________________ 5
4.1.1 Pro‐cyclicality of banking system ________________________________________________________________________________________ 6
4.1.2 Liquidity risk ______________________________________________________________________________________________________________ 6
4.1.3 Excess Leverage ___________________________________________________________________________________________________________ 6
4.2 Basel III Reform

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