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Essay sample - Basel Accord
Finance & Accounting
Pages 4 (1004 words)
When banks are operating at optimum efficiencies they are essential to the growth of the modern economy, facilitating spending and investments, allowing homes to be purchased, and businesses to expand…
This can cause a domino effect involving millions of citizens. Because banking has become more and more an international endeavor, there is a greater need for banking regulations that encourage international cooperation. The organization responsible for monitoring international banking is the Basel Committee on Bank Supervision, or BCBS. One of their major focuses is in regulating a bank’s capital. These concerns were considered and resulted in the establishment of the standards of banks to meet capital adequacy; these standards are all called the Basel Accords. (Larson, 2011) Background The BCBS was originally established in the 1970s to tackle the new challenges of banking across international boundaries. It became apparent that the failings and collapse of one country's banks was now being felt in other countries all over the world. It was obvious that intervention and prevention was necessary. In the 1980s, the United States Congress, pushed domestic regulatory agencies to set and enforce standards, including a fixed proportion of capital a bank must hold, or capital adequacy.(Lall, 2009) This is how the Basel Accords began. The accords have been adapted and expanded in attempts to meet needs and to speak to aspects that previous version of the accords may not have addressed sufficiently. In order to understand the Basel Accords better it is useful to review them individually in order to better compare and contrast the variations. ...
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