The Basel Agreement of 1988 established international riskbased capital adequacy standards for banks operating in signatory countries. The agreement set standards for international banking practice in order to establish a level playing field for competition in international banking. Under the agreements banks had to classify their assets into five risk categories so that they could calculate their total value of risk-weighted assets (RWA). It was required that equity capital had to exceed a minimum proportion of RWA.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|