Basel Accord. The BCBS continuously made efforts at securing the global supervisory regulations convergence that governs the international banks capital adequacy. A consultative process was also adopted by the committee in which proposals were circulated not only for the G-10 countries central bank governors, but also worldwide to the authorities in the supervisory realm. The key milestone in the capital measure and capital standards in Basel norms further involves Capital Accord, 1988, the amendment of market risk in the year 1996 and the 2004, new capital adequacy framework. Two essential objectives of the regulatory convergence by the work of Committee were inclusive of (Crouhy et al., 2000):
Framework requiring to strengthen international banking system soundness and stability
Framework is such that it is fair and has higher consistency degree within the banking application in distinct nations. The perspective here is to diminish a current competitive inequality source among the global banks.
The first Basel capital accord framework called for a minimum ratio of capital to assets weighted through risk of 8 percent being implemented until the 1992 end. This framework, ultimately was initiated not only within member nations, but also for all other nations virtually with active global banks (Crouhy et al., 2000). The committee, in the year 1993, issued a notion. The notion was to confirm that G ten nation banks with material global bank businesses should meet the minimum needs being set out under the accord system.
Then came the Basel II framework. This was termed as a new capital framework. In the year 1999, a proposal was issued by the committee for a new framework of capital adequacy for replacing the accord of 1988 (Crouhy et al., 2000). This in turn led towards the Revised 2004 framework of capital release in the year 2004. This was known as the Basel II framework. The key pillars in the framework were inclusive of:
Minimum requirements of capital sought at developing and expanding standard rules for setting out under the accord of 1988
Reviewing of supervisory need of a capital adequacy in an institution and internal process of assessment (Crouhy et al., 2000)
Effectively utilizing disclosure as a tool for strengthening discipline in the market and motivating practices of sound banking realms.
This new framework was designed for improving the manner requirements of regulatory capital reflects risks underlying it and for better addressing the financial innovativeness.