Basel Accords (Risk Management)

Basel Accords is the tool of risk management in financial sector. It means bank supervision rules and regulations. Basel I and Basel II have been issued by Committee on banking supervision. This committee was made in 1974 by 27 member countries. India is also member of this committee. All bank relative problems are solved  according to these rules. This committee has 12 permanent secretariats who maintain and amend these rules and regulations. Committee members can meet at Bank for international settlements in Basel, Switzerland.

These regulations are relating to the protection of depositors, reduction of liquidity risk, credit risk and solvency risk. This committee also discusses the causes of bank failures and suggests how to reduce its probability.

This committee has own research task force. Against this backdrop, the Research Task Force of the Basel Committee initiated a review of selected vendor credit-risk products, focusing on models that could be used to estimate probability of default, loss-given-default, or exposure at default, and models that could be used to assign ratings or produce credit scores, for wholesale or retail credit exposures. Basel Accord is also used for protect banking confidentiality. You can read more Basel’s rules and regulation from http://www.bis.org/  the official site of bank of international settlement.