Basel Accords

Banks and other financial intermediaries engage in financial transactions, often under highly leveraged positions, with the promise to use their expertise and economies of scale to reduce the inherent information asymmetries and attendant transaction (i.e., searching, monitoring, enforcing) costs. This is done in return for the opportunity to charge fees and set spreads that lead to profit. Although reduced, asymmetric information persists, and the endeavor to match buyers and sellers of financial assets involves risks to the viability of individual banks as well as to the overall stability of financial markets. Due to dissimilar economic, social, and political preferences, the tolerance for risk and the pursuit of transparency vary across countries, resulting in divergent approaches to the regulation of financial markets. The Basel Accords comprise ...