1-
The basel committee
2- Basel I
3- Basel II
1-
The basel Committee
The Basel committee on cautious banking control is an institution
created in 1974 by the governors of central banks of the countries
of the « G10 », regroups central banks and organisms
of regulation and banking surveillance of the main industrialised
countries (France, Belgium, Canada, Italy, Japan, Luxembourg,
Germany, the Nederlands, Switzerland, Spain, Sweden, Great Britain
and the United States). The creation of the committee followed
by a few months an incident that occured after the liquidation
of a German society that had a domino effect on other banks.
The representatives meet at the Bank of international regulations
in basel to discuss all the stakes related to the cautious surveillance
of banking activities. The year of the foundation of the basel
Committee coincides with the fall of the German bank Herstatt,
this incident had a major impact on some other banks, and considered
as an important financial crisis.
The committee was initially called the « Cooke Committee
», after Peter Cooke’s name, a manager of the Bank
of England that was one of the first to propose its creation
and he was its first president.
The committee meets four times a year and is currently composed
of the representatives of central banks and cautious authorities
of the 13 following countries: Germany, Belgium, Canada, Spain,
the United-States, France, Italy, Japan, Luxembourg, the Nederland,
Great Britain, Sweden and Switzerland. The purpose of this committee
is therefore to stimulate the cooperation and to promote international
harmonisation in terms of cautious banking control. But we must
add that the basel committee does not have any authority, and
its conclusions do not rule everything.
The
Basel committee has published a set of documents since 1975
related to the cautious banking control. The first of these
documents was published in 1975; it was called the Basel composition
agreement. In 1983, the Basel composition agreement was modified
to introduce the principle of consolidation of the cautious
banking control.
In 1988, the Basel Committee published a new document commonly
called the Basel Agreement on equity. The Agreement of 1988
fixes the minimal demands on equity based on the risks for active
banks on the international scale. From 1988, this framework
has been adopted according to the member countries, but also
to other countries where are the active banks on the international
scale.
1.1 The missions of the Basel Committee
One of the most famous activities of banks is to grant or to
make credits available (private individual, firm, communities…).
This job represents a risk: non-respect of commitments or default
from the borrower. To face it, bankers have set and improved
tools to evaluate, measure, control and follow the risks related
to credit.
For bank, the granting of a credit is an asset, a use that comes
along with liability counterparty: a resource, which is either
equity or debts in the widest sense. The higher the proportion
of equity is compared to debts, the stronger the organism is
and presents safety guarantees.
In case of default from the borrower, the bank undergoes a loss,
draw into its reserves which decreases its equity. It is the
realization of this risk that motivated the creation of international
proceedings. The Basel Committee has therefore been created
by the governors of the central banks of the G 10 in 1974. Its
missions are:
