The Essentials of Risk Management, Second Edition, 2nd Edition

Appendix 3.1

BASEL I

The 1988 Basel Accord, also referred to as the Accord or Basel I, established international minimum capital guidelines for the world’s banking systems. Its principal reform was to use a simple scheme to link each bank’s capital requirements to the bank’s specific credit exposures. To do so, the regulators divided bank exposures into broad classes that grouped together similar types of borrowers such as OECD banks, non-OECD banks, and corporate borrowers. Each borrower type was then linked to specific capital requirements.

What Exactly Did the 1988 Accord Require of Banks?

The 1988 Accord is laid out in a document called “International Convergence of Capital Measurement and Capital Standards,” published in July 1988. It defines ...