Revisions to the Standardised Approach for Credit Risk

From its organization, the Basel Committee on Banking Supervision (BCBS) sought to improve the quality of banking supervision through the recommendation of global standards to level the playing field of the banking industry. In 1988, it issued the Basel Accord,1 which recommended the adoption of a minimum regulatory capital requirement for risk-weighted assets of 8%. However, it was evidenced that this standard was not sufficiently sensitive to risks. The latter represented an incentive for financial institutions to take greater risks since this action would not be accompanied by an increase in regulatory capital requirements.