What are the Basel Accords?
These are regulations for banks set by a committee that meets in Basel, Switzerland. The first accord, Basel I, was agreed by the G10 group of major western economies after the 1970s banking crisis. Basel II and III were added later to strengthen its rules.
Where have you heard about the Basel Accords?
Their standards are widely followed around the world. A few years ago, you may have heard of the Basel III agreement, which came into force after the collapse of Lehman Brothers in 2008 and the financial crisis which followed.
What you need to know about the Basel Accords.
Their main purpose is to ensure banks have enough money to meet their obligations and absorb unexpected losses. Basel I, published in 1988, focuses on capital adequacy - the minimum reserves that a bank or financial institution must have available. Basel II was published in 2004 and introduced risk weighting. The greater the risk to which a bank is exposed, the greater the amount of capital it needs. Basel III, created in 2010, aimed to strengthen bank capital requirements and increase liquidity.