The Basel capital accords were a consensus arrived at by the Group of Ten nations on what capital levels should be deemed safe for commercial banks. The consensus arrived at the somewhat arbitrary figure that banks would do well to have 8 cents in capital for every dollar of loans they made. Over 100 countries have since signed up to the deal, which also includes a range of rigid risk weightings on different classes of loans.
Recently, proposed new regulations Basel II came out, allowing for a three pillar approach involving stricter forms of internal and external controls, and higher levels of transparency. The new capital accord tries to match the much greater...
