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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

Saraswati Bank, an Indian commercial bank, is reviewing the history of the Basel framework. The 1988 Accord issued by the Basel Committee on Banking Supervision mainly required internationally active banks to maintain a minimum ratio of capital to risk-weighted assets. Which risk did Basel I originally address in its minimum capital requirement?

Basel I originally addressed credit risk. It set a minimum capital to risk-weighted assets ratio of 8% based on broad risk weights for asset classes. Market risk was added through a 1996 amendment and operational risk was introduced under Basel II.

  1. ACredit riskCorrect
  2. BMarket risk
  3. COperational risk
  4. DLiquidity risk

Explanation

Basel I (1988) focused on credit risk, assigning risk weights to asset categories and requiring capital of 8% of risk-weighted assets. Market risk was added by the 1996 amendment, and operational risk came later with Basel II.

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