Business Policy

Introduction

Basel II is the term which refers to a round of deliberations by central bankers from round the world. In 1988, the Basel Committee (BCBS) in Basel, Switzerland, published a set of minimal capital requirements for banks. This is also known as the 1988 Basel Accord, and was enforced by law in the Group of Ten (G-10) countries in 1992, with Japanese banks permitted an extended transition period. Purpose of the original 1988 accord was twofold:

First, it aimed at creating a “level playing field” among banks by raising capital ratios, which were generally perceived as too low in many countries; and second, it also aimed at promoting financial stability by adopting a relatively simple approach to credit risk with the potential to distort incentives for bank risk-taking. The guidelines of Basle accord were originally adopted by the central banking authorities from 12 developed countries (all G-10 countries plus Luxembourg and Switzerland) in July, 1988. Their implementation started in 1989 and was completed