About the Basel Accord

The Bank for International Settlements (BIS) introduced the new capital accord in 2001. Also known as the Basel Capital Accord, the New Basel Capital Accord is applied on a consolidated basis to internationally active banks to address the risk management practices for active financial institutions in the international arena.

The stated aims of the accord are to:

Improve the banking sector's ability to absorb shocks that arise from financial and economic stress, whatever the source
Improve risk management and governance
Strengthen banks' transparency and disclosures.

Although the BIS introduced the Basel Accord to be implemented globally, different global regions, for example, United States, European Union and countries within regions, are allowed to customize the BIS regulations to comply with their own regulator(s) individual requirements, if these customizations are within the BIS Accord.

Basel I summary
The Basel Committee was formed in response to the liquidation of a Europe-based bank in 1974 This incident prompted the G-10 nations to set up the Basel Committee on Banking Supervision (BCBS), under the direction and supervision of the Bank of International Settlements, which is in Basel, Switzerland. As a result of the liquidation of the bank, this committee instigated the Basel 1 Accord in 1988.
Basel II summary
The Basel II Accord was introduced following substantial losses in the international markets since 1992, which were attributed to poor risk management practices. The Basel II Accord makes it mandatory for financial institutions to use standardized measurements for credit, market risk, and operational risk. However, different levels of compliance allow financial institutions to pursue advanced risk management approaches to free up capital for investment.
Basel III summary
Basel III is an extension of the existing Basel II Framework, and introduces new capital and liquidity standards to strengthen the regulation, supervision, and risk management of the whole of the banking and finance sector.

Parent topic: How to support the Basel Accord