The Basel Committee on Banking Supervision works to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing global financial stability. It does this by, amongst others, formulating bank supervisory standards and guidelines foremost of which is the Basel capital adequacy framework. The primary objectives of the capital standards are firstly to require banks to hold enough capital to absorb losses and withstand economic downturns thereby strengthening the soundness and stability of the international banking system and secondly to ensure a fair and high degree of consistency in the application of capital standards to banks in different countries with a view to reducing a source of competitive inequality among international banks.
The objective of this workshop is to outline the development of the Basel international capital standards since 1988. It explains how each generation of standards, from Basel I to Basel III, has changed to reflect changes in the financial system, address deficiencies in previous standards and respond to regulatory arbitrage i.e., banks’ efforts to circumvent the intended constraints placed upon them.