The Basel accords are sets of agreed-upon banking rules. These rules are put forth by the Basel Committee on Bank Supervision. Each has multiple layers of Basel regulations to make sure:
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There is not too much risk
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There is always enough capital to pay for any obligation or loss that could potentially occur
This also allows international banks to have a more unified set of guidelines. Now there can be uniform ways to manage the finances and economic issues of the world’s b

In 1988, the BCBS brought forth their first set of Basal regulations, after a debt crisis in Latin America raised concerns of capital ratios among international banks. Basel I was all about credit risk and a classification system for bank assets.

Basel I Summary
This first Basal accord did the following:
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Created bank asset classification (5 separate risk categories)
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Created regulation for capital ratio, that is, how assets needed to be balanced properly with risks
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Defined capital with two tiers: core capital (like stock) and supplementary capital (like investment gains)
The bank’s Basel capital requirements had to be at least 8% of whatever it had in risk-weighted assets. In simple calculations, if a bank had $100 of risky assets, it would need to keep $8 in capital for protection.
Problems with this model were believed to be from its “over-simplified calculations and classifications.”
But this accord was created for evolution. It was necessary, then, to adjust and move into Basel II.

Basel II Summary
Basel 2 did the following main things. These three points are often called the “pillars” of Basel 2.
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Pillar 1: Minimum capital requirements. More risk; more capital requirements. While the banks had to keep their 8% minimum capital requirement with Basel 2, that capital was further divided into Tier 1, Tier 2, and Tier 3 to bring up Basel capital requirements when necessary.
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Pillar 2: Supervision. Adding extra supervision over the regulations was also included in Basel 2.
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Pillar 3: Market discipline. Market discipline was introduced in Basel 2 with disclosure requirements – mandating disclosure of particular bank activities be made twice each year.
While Basel 2 started out in 2004, it was still slowly being implemented in 2008 – right at the time of financial hardship in the Group of Ten countries. The time the United States was entering their recession.

Is There a Basel 2.5?
Before we move on to Basel 3, let’s take a quick look at the mid-way point – Basel 2.5. While Basel 1, 2, and 3 are technically the only true accords that exist, some small changes happened in between Basel 2 and Basel 3. These changes are often referred to as Basel 2.5. Basel2.5 was a revision of some of the aspects of Basel 2. As Market Realist points out, they believed “the existing norms often failed to correctly address the market risks that banks took on their trading books.”
What Basel 2.5 did, then, was update Basel 2’s regulatory Basel capital requirements when it came to market trading risks. Ultimately, however, the largest and most important changes actually came through Basel 3. Let’s look at the main difference between Basel 2 and Basel 3.

Basel III Summary
Here is a Basel III summary of the changes and Basel III capital requirements bringing a closer look at the difference between Basel 2 and Basel 3 – namely, higher standards overall for commercial banks.
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Basel III capital requirements were stricter than Basel II.
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Basel III ratios for risk-weighted assets were strengthened.
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The Basel III Leverage Ratio was introduced. The equation is actually simple: divide capital (money) by total consolidated assets. The minimum percentage allowed to come from this calculation is the Basel III Leverage Ratio; today the ratio is at 6% or 5% depending on the type of institution.
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New ways to guard against issues that arise from the cyclical nature of banks were included in Basel III.

What is Basel IV? 👇

https://www.investopedia.com/basel-iv-5218598