🏦 Basel Accords
📚 US Capital Private Bank Knowledge Base
📖 Definition
The Basel Accords are a set of international banking regulations developed by the Bank for International Settlements’ (BIS) Basel Committee on Banking Supervision. They provide recommendations on banking laws and regulations to enhance the stability and soundness of the global banking system. The Basel Accords aim to improve risk management, capital adequacy, and transparency among banks worldwide.
⚙️ Versions of Basel Accords
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Basel I (1988): Introduced minimum capital requirements focused primarily on credit risk.
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Basel II (2004): Expanded to include operational and market risks, with a three-pillar approach (minimum capital requirements, supervisory review, and market discipline).
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Basel III (2010 onward): Strengthened capital requirements, introduced new regulatory requirements on liquidity and leverage to address weaknesses revealed by the 2008 financial crisis.
📝 Key Features
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💰 Capital Adequacy: Banks must hold sufficient capital to cover risks and absorb losses.
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📊 Risk Management: Emphasizes assessing credit, market, and operational risks.
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🔍 Supervisory Review: National regulators monitor banks’ risk management practices.
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📢 Market Discipline: Requires disclosure of risk exposures to increase transparency.
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💧 Liquidity Requirements: Basel III introduced liquidity coverage and net stable funding ratios.
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⚖️ Leverage Ratio: Limits excessive borrowing to ensure financial stability.
✅ Benefits
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Strengthens the global banking system’s resilience to financial shocks.
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Promotes consistent international regulatory standards.
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Enhances risk awareness and management among banks.
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Builds confidence among depositors, investors, and regulators.
⚠️ Considerations
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Implementation varies by country, depending on local regulators.
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Compliance can increase operational costs for banks.
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Some critics argue that overly stringent requirements may restrict lending and economic growth.
🔎 Related Terms
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🏦 Bank for International Settlements (BIS): The organization overseeing Basel Committee.
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💱 Capital Adequacy Ratio (CAR): The ratio of a bank’s capital to its risk-weighted assets.
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📈 Risk-Weighted Assets (RWA): Assets weighted by credit risk to determine required capital.
📚 References
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🌐 Official Basel Committee Website: https://www.bis.org/bcbs/
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📄 Basel Accords Documents and Regulatory Frameworks
📞 Contact US Capital Private Bank
📧 Email: [email protected]
🌐 Website: https://uscapitalprivatebank.com