• About the FSA
  • What we do
    • International and EU
      • CRD / Basel2
        • Industry groups
        • Practical information for firms
        • Supervisory disclosure
        • Relevant documents
        • Archived material
        • UK Government 2008 Credit Guarantee Scheme

The original Basel Accord was agreed in 1988 by the Basel Committee on Banking Supervision. The 1988 Accord, now referred to as Basel 1, helped to strengthen the soundness and stability of the international banking system as a result of the higher capital ratios that it required.

Basel 2 is a revision of the existing framework, which aims to make the framework more risk sensitive and representative of modern banks' risk management practices. There are four main components to the new framework:

• It is more sensitive to the risks that firms face: the new framework includes an explicit measure for operational risk and includes more risk-sensitive risk weightings against credit risk.
• It reflects improvements in firms' risk-management practices, for example the internal ratings-based approach (IRB) allows firms to rely to a certain extent on their own estimates of credit risk.
• It provides incentives for firms to improve their risk-management practices, with more risk-sensitive risk weightings as firms adopt more sophisticated approaches to risk management.
• The new framework aims to leave the overall level of capital held by banks collectively broadly unchanged.

The new Basel Accord has been implemented in the European Union via the Capital Requirements Directive (CRD). It affects banks and building societies and certain types of investment firms. The new framework consists of three 'pillars'. Pillar 1 of the new standards sets out the minimum capital requirements firms will be required to meet for credit, market and operational risk. Under Pillar 2, firms and supervisors have to take a view on whether a firm should hold additional capital against risks not covered in Pillar 1 and must take action accordingly. The aim of Pillar 3 is to improve market discipline by requiring firms to publish certain details of their risks, capital and risk management.

Information in this section

Industry groups
This section presents the different industry groups that have been created to provide strategic leadership, to help the FSA formulate its policy before consultation, and to take forward discussion of specific policy issues.

The UK Government’s 2008 Credit Guarantee Scheme

Practical information for firms
This section provides practical information for firms implementing the CRD.

Archived material
This section consists of material that is no longer current but may still be of interest to certain groups or individuals.

CRD-related documents
The most important CRD-related FSA Documents since DP 13 in July 2002 are available in the FSA library.