In July 1988, the central bank governors of the Group of Ten Countries and Luxembourg approved a document entitled «International Convergence of Capital Measurement and Capital Standards» which is the culmination of the Banking Regulations and Supervisory Practices Committee`s efforts in recent years to ensure the international convergence of prudential rules on the adequacy of international banks` capital adequacy. This agreement (hereafter the Basel Agreement of July 1988) is another step in the development of a framework for international cooperation in banking supervision. Important steps in the process included the Basel Agreements of 1975 and 1983, which defined the principles governing the distribution of supervisory tasks between the parent and host authorities through branches, subsidiaries and joint ventures in the international banking sector, and the exchange of information between these authorities. Basel I, the 1988 Basel Agreement, focuses mainly on credit risk and appropriate asset weighting. Bank assets were divided into five categories per credit risk, with risk weights of 0% (for example. B, liquidity, gold bars, real estate liabilities such as treasury bills), 20% (securitizations such as mortgage-backed securities (MBS) with the highest AAA rating), 50% (municipal yield bonds, Residential Mortgages), 100% (. B for example, most corporate debt) and some of the highest AAA-rated assets, 50% (communal income bonds, residential mortgages), 100% (. B for example, most corporate debt) and some unceded assets. Banks with an international presence are required to hold capital of up to 8% of their risk-weighted assets.

Leverage ratio – total capital/average total balance sheet The document consists of two main sections covering a) the definition of capital and (b) the structure of risk weights. Two shorter sections define the target reference ratio and the transition and implementation modalities. There are four technical annexes for capital definition, counterparty risk weights, credit conversion factors for off-balance sheet items and transitional arrangements. This report is the result of the committee`s multi-year work to ensure the international convergence of supervisory rules on the capitalability of international banks. Following the publication of the Committee`s proposals in December 1987, a consultation procedure was launched in all G-10 countries and the proposals were also distributed to supervisors around the world.