After the creation of the BCBS, the member nations discussed the fact that certain banks avoided the regulatory authorities by hiding under their country’s laws when it came to international disputes and settlements. This led to the creation of the “International Convergence of Capital Measurements and Capital Standards” more commonly known as Basel I (Balin, 2008).
The main purpose of Basel I was to provide benchmarks for banks related to “capital adequacy” for developed economies which were the member countries. It was not to be used in lesser developed or emerging countries. Basel I was also implemented to help set rules to guard against risk related to a company’s credit strength. The accord does not set any standards for risks related to recessions or exchange rate fluctuations. Basel I asks banks to adopt a conservative pattern and has also set minimum reserve standards for banks to implement (Balin, 2008).
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