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In this post we show you what are the Basel Accords and what are the particularities of the agreements Basilea I, Basel II Y Basel III. If you already know these concepts and are interested in knowing more, we suggest you read the post: Metadata management in the Basel Accords.
The Basel Accords They have evolved at the pace of events, always with the aim of reducing the indebtedness of financial institutions as much as possible and guaranteeing their capacity to respond to operational risk, credit and market.
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The agreement of Basilea I, Subscribed on 1988, established the basic principles on which banking activity should be based, such as regulatory capital, The requirement of permanence, loss-absorbing capacity and bankruptcy protection. This capital had to be sufficient to meet credit risks, market and exchange rate. The agreement also established that the bank's minimum capital must be 8% of total risk assets (credit, Aggregate market and exchange rate).
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Agreement Basel II, Approved in 2004, even though it was not applied in Spain until 2008. It further developed the calculation of risk-weighted assets and allowed banks to apply risk ratings based on their internal models, provided that they were previously approved by the supervisor. Therefore, This agreement incorporated new trends in the measurement and monitoring of the different risk classes. Emphasis was placed on internal methodologies, supervisory review and market discipline.
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The Deal Basel III, approved in December 2010, tried to adapt to the magnitude of the economic crisis, taking into account the exposure of most of the world's banks to "toxic assets" on bank balance sheets and in derivatives circulating in the market. Fear of the domino effect that bank insolvency could cause, led to the establishment of new recommendations such as:
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Tightening of criteria and increasing the quality of capital volume to ensure its greater capacity to absorb losses.
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Modification of risk calculation criteria to reduce the level of actual exposure.
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Building capital reserves during good times to cope with changing business cycle.
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Entering a new ratio leverage as a complementary measure to the solvency ratio.
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