What are the Basel agreements?

The Basel Agreement is a collection of agreements concluded by Basilet for supervision of the bank (BCBS). It is named after one of the most populous cities in Switzerland. There is a BCBS administrative unit and also serves as a regular meeting place. Basel Accords offers recommendations on banking laws and regulations to financial institutions to encourage capital management and the ability to manage losses. These countries make up half of the main economies of the G-20. Since its foundation, other nations have joined the BCBS from this larger group, including South Africa, India and China. The country outside the G-20 empire, such as Singapore and Hong Kong, are also members.

It was the liquidation of Cologne at the German bank Herstatt for a delay in the exchange of dollar payments, which resulted in the creation of BCB and also led to the origin of Basel I. Posted in 1988 Basel focuses on unexpected losses of financial institutions such as the one that the bank Herstat experienced. The agreement has set five levels of risks of capital adequatelyNosta - 0, 10, 20, 50 and 100 percent - measures the scope in which the bank can be injured by a financial loss; For example, a bank with 0 percent of its risky weighted assets can be considered as Tier 1 capital. According to Basel, BCBS suggests that institutions operating at international level work at 8 % of risk weight.

Basel II, for the first time published in 2004, is expanding beyond the focus of the predecessor of the credit risk. Adding control of supervision and market discipline to minimal credit requirements, so the Basel Committee set up the so -called three pillars of agreements. The prevailing focus of Basel II is strengthening and supervision of the international financial community.

with the global financial crisis caught at the end of 2000, the third edition of Basile's agreement appeared in 2009. Basel III revised previous agreements by focusing on strengthening individual financial institutions to avoid extensive shocks. Such strengthening is supported by techniques such as bank lever and liquidity.

especially BCB does not make the power to enforce agreements on Basel. However, it supports international convergence of basic financial standards. There are members of non-BCBS who carry out Basel agreements through their national laws and regulations.