The Meaning Of Basel Agreement

In September 2010, the Group of Governors and Supervisors (GHOS) announced higher minimum capital requirements for commercial banks, preceded by an agreement reached in July on the overall organisation of the capital and liquidity reform package, now known as “Basel III”. In November 2010, the new capital and liquidity standards were approved at the G20 summit in Seoul and adopted at the Basel Committee meeting in December 2010. The Basel Accords are an agreement among the member countries of the Basel Committee on the need and method of strengthening regulation in order to establish and maintain a sound international banking system. The agreements aim to respond to the desire of industrialized countries for a common framework for the supervision of international banks. Moreover, member states and several non-members will want to implement the agreements, even if the Basel Committee has no legal power to enforce its decisions. The particularities of different countries characterize the Committee`s decision not to legislate to enforce the Basel Accords. Rather, the decision to adopt legislation on aspects of the agreements is left to the discretion of the States members of the Committee. Following the collapse of Lehman Brothers in 2008 and the ensuing financial crisis, BCBS decided to update and strengthen the agreements. The BCBS considered poor governance and risk management, inadequate incentive structures and an over-indebted banking sector to be causes of the collapse. In November 2010, an agreement was reached on the overall organisation of the capital and liquidity reform package.

This agreement is now known as Basel III. The regulatory reforms that followed the crisis were approved on 7 December 2017 by the Group of Central Bank Governors and Supervisors (GHOS), the Supervisory Board of the Basel Committee. The market risk framework adjustments were approved by GHOS on January 14, 2019. The revised standards will make banks more resilient and restore confidence in banking systems. They are called the Basel Accords, since the BCBS maintains its secretariat at the Bank for International Settlements in Basel, Switzerland, and the Committee normally sits there. The Basel Accords are a series of regulatory recommendations in the banking sector. The Basel Accords are extremely important for the functioning of international financial markets.. . .

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