Capital adequacy and internal models

Abstract

The Basel Committee was set up in 1974 by the central-bank Governors of the Group of Ten countries in the aftermath of serious disturbances in international currency and banking markets, especially the failure of Bankhaus Herstatt in West Germany. The first meeting took place in February 1975. The committee is formed of 13 members. The members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, The Netherlands, Spain, Sweden, Switzerland, The UK and The USA. These countries are represented by their Central Bank or the authority responsible for the banking business in their country. The main aim of the Committee is to provide a forum for regular cooperation on banking supervision by: 1. Exchange of information. 2. Improving supervisory techniques. 3. Setting supervisory standards. The Committee is not a supervisory authority and does not have any legal force. It formulates broad supervisory standards and guidelines and recommends best practice. The Committee encourages convergence towards common approaches and common standards, hoping that individual authorities will implement them as best suited to their own national systems. The Committee reports to the Committee of Central Bank Governors of the Group of Ten countries, which meets at the Bank for International Settlements.