The Basel Accord, as the prescriptions came to be called, asked banks to identify the credit risk in their activities and to provide capital to meet obligations and absorb unexpected losses arising from such risk. The Basel I framework was later extended to cover market risks.
In 2004, the first Basel Accord was replaced by a new Accord, called Basel II, which sought to shift the focus from a single broad brush risk measure to measures which were more risk sensitive and flexible, provided more emphasis on banks’ internal methodologies, supervisory review and market discipline and which provided incentives for stronger and more efficient risk management by banks.