How do Basel Norms work?
- The Basel accord is the name given to a group of BCBS agreements that mainly deal with risks to banks and the financial system.
- The agreement sets this as its primary objective to ensure that financial institutions have enough capital to meet obligations and absorb unforeseen losses.
- India has agreed to the Basel accords for the banking system.
Basel Norms
The Basel Committee on Banking Supervision (BCBS) established the Basel Norms as the standards for international banking laws. These standards aim to harmonize international financial legislation and strengthen the global banking system. A total of 27 people from different nations, including India, make up BCBS. Basel, I, II, and III are the three guidelines the Basel Committee has released to achieve its goal. The Basel Committee on Banking Supervision series focuses on the threats to banks and the financial system. Basel-III, the most recent agreement, was approved in November 2010. Basel III mandates a minimum level of common equity and a minimum liquidity ratio for banks. Its administrative headquarters are in the Basel, Switzerland-based headquarters of the Bank of International Settlements (BIS). Thus, the Basel norms’ name.
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