Q&As

Will the UK remain a signatory to the Basle Capital Convergence Agreement of July 1988 post Brexit?

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Published on LexisPSL on 04/01/2018

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • Will the UK remain a signatory to the Basle Capital Convergence Agreement of July 1988 post Brexit?
  • The Basel Accords—Basel I, II and III
  • EU CRD IV package
  • Basel following Brexit

The Basel Accords—Basel I, II and III

The Basle (or Basel) Capital Convergence Agreement of July 1988, is the original text of the first Basel Capital Accord (Basel I), which set down an agreement among the G-10 central banks (including the UK and non-EU countries such as the United States of America and Japan) to apply common minimum capital standards to their banking industries originally to be achieved by end of 1992. It focused mainly on credit risk by creating a bank asset classification system and the appropriate risk weighting of assets.

The second Basel Accord, the Revised Capital Framework (Basel II) served as an update of Basel I and focused on three main areas, minimum capital requirements, supervisory review of an institution’s capital adequacy and internal assessment process and an effective use of disclosure to strengthen market discipline and encourage sound banking practices (ie the three pillars).

Following the Lehmans Brothers collapse of 2008 and the ensuing financial crisis, the Basel Committee on Banking Supervision (BCBS) decided to update and strengthen the Accords. In July 2010, an agreement was reached regarding the overall design of the capital and liquidity reform package (Basel III). Basel III is a continuation of the three pillars, along with additional requirements and safeguards, including requiring banks to have minimum amount of common equity and a minimum liquidity ratio. Basel III also

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