what is basel i 
basel i is a set of international banking regulations established by the basel committee on banking supervision bcbs it prescribes minimum capital requirements for financial institutions with the goal of minimizing credit risk under basel i banks that operate internationally were required to maintain at least a minimum amount of capital 8 based on their risk weighted assets basel i is the first of three sets of regulations known individually as basel i ii and iii and collectively as the basel accords history of the basel committeethe bcbs was founded in 1974 as an international forum where members could cooperate on banking supervision matters the bcbs says it aims to enhance financial stability by improving supervisory know how and the quality of banking supervision worldwide 1 this is done through regulations known as accords basel i the committee s first accord was issued in 1988 and focused mainly on credit risk by creating a classification system for bank assets the bcbs regulations do not have legal force members are responsible for implementation in their home countries basel i originally called for a minimum ratio of capital to risk weighted assets of 8 which was to be implemented by the end of 1992 in september 1993 the bcbs announced that g10 countries banks with material international banking business were meeting the minimum requirements set out in basel i according to the bcbs the minimum capital ratio framework was adopted not only in its member countries but in virtually every other country with active international banks benefits of basel ibasel i was developed to mitigate risk to consumers financial institutions and the economy at large basel ii brought forth some years later lessened the capital reserve requirements for banks that came under some criticism but because basel ii did not supersede basel i many banks continued to operate under the original basel i framework later supplemented by basel iii addendums perhaps the greatest legacy of basel i was that it contributed to the ongoing adjustment of banking regulations and best practices paving the way for further protective measures criticism of basel ibasel i has been criticized for hampering bank activity and slowing growth in the overall world economy by making less capital available for lending critics on the other side of that argument maintain that the basel i reforms did not go far enough both basel i and basel ii were faulted for their failure to avert the financial crisis and great recession of 2007 to 2009 events that became a catalyst for basel iii basel i was developed to mitigate risk to consumers financial institutions and the economy at large requirements for basel ithe basel i classification system groups a bank s assets into five risk categories labeled with the percentages 0 10 20 50 and 100 a bank s assets are assigned to these categories based on the nature of the debtor the 0 risk category consists of cash central bank and government debt and any organisation for economic co operation and development oecd government debt public sector debt can be placed in the 0 10 20 or 50 category depending on the debtor development bank debt oecd bank debt oecd securities firm debt non oecd bank debt under one year of maturity non oecd public sector debt and cash in collection all fall into the 20 category the 50 category is for residential mortgages and the 100 category is represented by private sector debt non oecd bank debt maturity over a year real estate plant and equipment and capital instruments issued at other banks the bank must maintain capital referred to as tier 1 and tier 2 capital equal to at least 8 of its risk weighted assets this is meant to ensure that banks hold an adequate amount of capital to meet their obligations for example if a bank has risk weighted assets of 100 million it is required to maintain capital of at least 8 million tier 1 capital is the most liquid type and represents the core funding of the bank while tier 2 capital includes less liquid hybrid capital instruments loan loss and revaluation reserves as well as undisclosed reserves 