Definition of 'Basel I'
The Basel I Accord is based on the concept of risk-weighted assets (RWAs). RWAs are a measure of the riskiness of a bank's assets, and they are used to determine how much capital a bank must hold. The Basel I Accord specifies that banks must hold capital equal to at least 8% of their RWAs.
The Basel I Accord has been criticized for being too simplistic and for not taking into account all of the risks that banks face. In response to these criticisms, the Basel Committee has issued a series of amendments to the Basel I Accord, including the Basel II Accord, which was issued in 2004, and the Basel III Accord, which was issued in 2010.
The Basel I Accord has had a significant impact on the banking industry. It has forced banks to hold more capital, which has made them less risky. However, the Basel I Accord has also been criticized for making it more difficult for banks to lend money, which has slowed down economic growth.
The Basel I Accord is still in effect today, but it is scheduled to be replaced by the Basel III Accord in 2019. The Basel III Accord is expected to be more comprehensive and to take into account a wider range of risks.
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