“The Basel Accord, also known as the Basel Accords, is a series of international agreements on banking regulations and capital adequacy standards developed by the Basel Committee on Banking Supervision (BCBS).
The Basel Committee is a forum consisting of central banks and regulatory authorities from around the world. It was established in 1974 by the central bank governors of the G10 countries (now G20) to enhance the supervision and regulation of the global banking system.
The first Basel Accord, known as Basel I, was introduced in 1988 and focused on establishing minimum capital requirements for banks based on the riskiness of their assets. Basel I required banks to maintain a minimum capital adequacy ratio (CAR) of 8% of their risk-weighted assets.
The second Basel Accord, known as Basel II, was introduced in 2004 and was a more comprehensive framework that aimed to improve risk management practices and increase the accuracy of capital requirements for banks. Basel II allowed banks to use internal risk models to calculate their capital requirements based on their specific risk profiles.
The third Basel Accord, known as Basel III, was introduced in response to the global financial crisis of 2008 and aimed to strengthen the regulatory framework for banks by increasing capital requirements, introducing new liquidity standards, and enhancing the supervision of banks by regulators.
Overall, the Basel Accords represent an important global effort to ensure the stability and soundness of the banking system by establishing minimum standards for capital adequacy and risk management practices.”