Basel Norms and Bank Capital Requirements

Banks lend public deposits and market money to borrowers, each carrying default risk.

To prevent collapse, banks must reserve capital against potential losses. Enter Basel Norms,

international banking regulations from the Basel Committee on Banking Supervision, headquartered in

Basel, Switzerland. Basel I in 1988 focused on credit risk,

requiring 8% capital of risk weighted assets. Basel II in 2004 added three pillars:

capital adequacy, supervisory review of credit, market, and operational

risks, plus mandatory disclosure requirements. After the 2008 financial crisis exposed undercapitalized

banks, Basel III arrived in 2010. It increased capital requirements to