International convergence of capital measurement and capital standards

July 1988

This document is the original text of the so-called Basle Capital Accord, which sets down the agreement among the G-10 central banks to apply common minimum capital standards to their banking industries, to be achieved by end-year 1992. The standards are almost entirely addressed to credit risk, the main risk incurred by banks.

The document consists of two main sections, which cover (a) the definition of capital and (b) the structure of risk weights. Two shorter sections define the target standard ratio and the transitional and implementing arrangements. There are four technical annexes covering the definition of capital, the counterparty risk weights, the credit conversion factors for off-balance-sheet items and the transitional arrangements.

In recent years, five amendments to the Accord have been agreed, for four of which specific changes to the language of the original Accord have been published. The fifth amendment, which introduces parallel capital requirements for market risk, does not include language to amend the 1988 text. This amendment issued in January 1996 is published as "Amendment to the capital accord to incorporate market risks ".