Basel Accord
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The Basel Accord(s) or Basle Accord(s) (see spelling section below) refers to the banking supervision Accords (recommendations on banking laws and regulations), Basel I and Basel II issued 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 and the committee normally meets there.
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[edit] The Basel Committee
The Basel Committee consists of representatives from central banks and regulatory authorities of the G10 countries, plus others (specifically Luxembourg and Spain). The committee does not have the authority to enforce recommendations, although most member countries (and others) tend to implement the Committee's policies. This means that recommendations are enforced through national (or EU-wide) laws and regulations, rather than as a result of the committee's recommendations - thus some time may pass between recommendations and implementation as law at the national level.
[edit] The Basel Accords
The key Accord to come from the Basel Committee refers to capital adequacy - ensuring that financial institutions retain enough capital (see Tier 1 capital and Tier 2 capital) to protect themselves against unexpected losses.
The first Basel Accord was issued in 1988 and sets out the basics - such as credit risk. This was updated in 1996 to cover market risk and to clarify and extend the first Accord.
The second Basel Accord was finalized in 2004 after an extensive consultation process. It is aimed at making the capital measures much more risk sensitive and itemizing and quantifying several more categories of risk.
Work has commenced on preliminary aspects of the third Basel Accord, but, not much is currently known about what this will entail.
[edit] Spelling
The Basel Committee is named for the Swiss town of Basel. In early publications, the committee sometimes used the English spelling "Basle" or the French spelling "Bâle," names that are sometimes still used in the press. More recently, the Committee has deferred to the predominantly German population of the region and used the spelling "Basel."
[edit] See also
[edit] References
- http://www.bis.org: The site of the Bank of International Settlements.
- http://bis2information.org: Practical articles, on BIS2 and risk modelling, submitted by professionals to help create an industry standard.
