Basel II

The Basel accords—from Basel I in 1988 through the Basel II final rules approved in November 2007—are international efforts to determine the amount of capital a bank should hold to honor its commitments to its customers and to maintain its financial viability when it suffers unexpected losses. Basel I fixed a single minimum capital requirement using an umbrella concept of loss that did not distinguish among losses resulting from different types of risk. Basel II lays out a more sophisticated, nuanced, and modern determination of bank capital holding requirements and implements separate capital regimes categorized by type of risk.