But there are several important channels of influence between banks and the budget, some more obvious than others. Because of the scale and pervasiveness of banks, and the speed with which liquidity conditions can change, the impact of banks on the budget can be crucial.
While emphasizing the importance of capital adequacy in the business operations of the commercial banks, the Capital Accord has also set a clear definition for bank capital, leading to the development of such concepts as tier-one capital and tier-two capital, and answered the question on how the asset risks could be properly calculated.