Basel Accords: Purpose, Pillars, History, and Member Countries

The Basel Accords are a set of international banking regulations that were developed by the Basel Committee on Banking Supervision (BCBS). The BCBS is an international organization that was established in 1974 by the central bank governors of the Group of Ten (G10) countries. The Basel Accords are designed to promote the safety and soundness of the international banking system by setting minimum capital requirements for banks.

The first Basel Accord was published in 1988 and was known as Basel I. Basel I required banks to hold capital equal to 8% of their risk-weighted assets. The risk-weighted assets of a bank are the assets that are most likely to lose value in the event of a financial crisis. Basel I was revised in 2004 and became known as Basel II. Basel II introduced a more risk-sensitive approach to capital requirements. Banks were required to hold more capital for riskier assets and less capital for less risky assets.

The third Basel Accord, known as Basel III, was published in 2010. Basel III is the most comprehensive set of banking regulations ever developed. Basel III introduces a number of new capital requirements, including a leverage ratio, a liquidity coverage ratio, and a net stable funding ratio. The leverage ratio is a measure of a bank's capital relative to its assets. The liquidity coverage ratio is a measure of a bank's ability to meet its short-term obligations. The net stable funding ratio is a measure of a bank's ability to fund its activities with stable sources of funding.

The Basel Accords have been adopted by most countries around the world. The Basel Accords have been credited with helping to strengthen the international banking system and reduce the risk of financial crises. However, the Basel Accords have also been criticized for being too complex and for not being flexible enough to address the challenges of the 21st century financial system.

The Basel Committee is currently working on a revision of Basel III. The revised Basel Accord is expected to be published in 2023. The revised Basel Accord is expected to address some of the challenges of the current financial system, such as the growth of shadow banking and the increasing use of derivatives.

The Basel Accords are an important part of the international financial system. The Basel Accords help to promote the safety and soundness of the international banking system and reduce the risk of financial crises. The Basel Accords are also a significant part of the global regulatory framework for banks.