Basle Capital Convergence Agreement Signatories

12 Sep , 2021   David  

For this reason, it was expected that only the few largest U.S. banks would operate under Basel II rules, while the rest would be regulated under Basel I. Basel III was developed in response to the financial crisis; it does not replace Basel I or BASEL II[clarification needed], but focuses on several issues mainly related to the risk of a bank run. [Citation required] Basel I, i.e. the 1988 Basel Convention, focuses primarily on credit risk and appropriate risk weighting of assets. Bank assets have been classified and grouped into five categories by credit risk, of which 0% are weighted (e.g. B in cash, precious metals, home country debt as government bonds), 20% (securitizations as mortgage-backed securities) with the highest AAA rating, 50% (communal yield bonds, residential mortgages), 100% (z.B). most corporate debt) and some unrated assets. Banks with an international presence are required to hold capital of up to 8% of their weighted assets (RWA). The Tier 1 capital ratio = Tier 1 Capital / all RWA The document consists of two main sections that (a) cover the definition of capital and (b) the structure of risk weights.

Two shorter sections define the baseline ratio of the objectives as well as the modalities of transition and implementation. Four technical annexes cover the definition of capital, counterparty risk weights, off-balance-sheet translation factors and transitional provisions. In recent years, five amendments to the agreement have been agreed, four of which have been published in the language of the original agreement. The fifth amendment, which introduces parallel capital requirements for market risks, does not contain language to amend the 1988 text. This amendment, published in January 1996, is published in the form of a “modification of the capital allocation for the integration of market risks”. In July 1988, the governors of the central banks of the Group of Ten countries and Luxembourg approved a document entitled “International Convergence of Capital Measurement and Capital Standards”, which is the culmination of the efforts made in recent years by the Banking Regulatory and Supervisory Committee to ensure international convergence of prudential capital rules for international banks. This Agreement (hereinafter referred to as the Basel Agreement of July 1988) constitutes a further step in the development of a framework for international cooperation in the field of prudential supervision in the field of banking activities. The Basel Accords of 1975 and 1983, which set out principles for the allocation of prudential responsibility for branches, subsidiaries and joint ventures in the international banking sector between parent and host authorities and for the exchange of information between those authorities, were chosen as one of the most important steps in this process.

. . .