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BASLE

The first capital accord introduced by the Basle Committee in 1988, to ensure that capital requirements across most developed countries were standardised and uniform i.e. all banks had to back their assets with the same percentage of capital when adjusted for risk.

This capital accord used a risk-weighted system where each class of asset would have a risk-weight attached to it so banks could calculate how much capital it was legally required to hold. Bank's were advised to hold at least 8% of their asset value in the form of capital - of which at least 50% of that must be held in Tier 1 capital.

However this accord eventually broke down when the system was attacked for not being operationally robust enough and therefore not punishing banks who held riskier loans compared to those with safe loans. BASLE II has since replaced this capital accord. 

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