Basel Accord
Produced in partnership with Morrison & Foerster LLP
Basel Accord

The following Financial Services practice note Produced in partnership with Morrison & Foerster LLP provides comprehensive and up to date legal information covering:

  • Basel Accord
  • Purpose and focus of the Basel Accord
  • Revision of the Basel Accord
  • IRB approach
  • The Basel II framework document and Basel III
  • Banking Regulation—Getting The Deal Through

The Basel Committee on Banking Supervision (BCBS), consisting of the central banks of governors of the so-called G10 countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States), published a report in July 1988 setting out a proposed framework for measuring capital adequacy, and minimum capital requirements, for internationally-active banks. This is known as the Basel Accord (or Basel I).

Most countries in the world have since adopted the Basel Accord, or elements of it, and in many cases have applied its provisions to purely domestic banks and financial institutions, as well as internationally–active banks.

Purpose and focus of the Basel Accord

The purpose of the Basel Accord was to strengthen the stability of the international banking system and achieve some degree of consistency between bank capital frameworks applied in different countries.

Initially, the Basel Accord focused almost entirely on banks holding sufficient capital to protect them against the credit risk to which they were exposed. Various modifications and supplements were made over several years, including the incorporation of an amendment requiring banks to apply capital charges against their market risk, ie the risk of losses arising from movements in market prices.

Revision of the Basel Accord

In June 1999, the BCBS announced its intention to develop a new, more sophisticated, capital a

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