History Bank for International Settlement
History of the Bank for International Settlement (BIS) was founded in 1930, making itworld¶s oldest international financial institution and remains the principal center for international central bank cooperation(Felsenfeld & Bilali, 2004; Toniolo, 2005). OnJanuary 20, 1930, the BIS was established at the Hague Conference (Hague Conventionof 1930) in the context of the Young Plan or Dawes Loans (the international loans issuedto finance reparations) which can dealt with the coordinating settlement of reparationpayment by the German government and its allies after First World War (Felsenfeld &Bilali, 2004). The primary intention of Bank¶s founders¶ was to create a focus for cooperation among central banks. Thus, the BIS act as the bank for central banks toaccept deposits of a portion of the foreign exchange reserves of central banks and investthem prudently for a yield in market return(Bank for International Settlements ArchiveGuide, 2007).Following the World War II until early 1970s, BIS monetary policy focused onimplementing and defending the Bretton Woods system(BISA Guide, 2007). In the1970s and 1980s, the focus was on managing cross-border capital flow transactionsfollowing the oil crises and the international debt crisis. The 1970s crisis also brought theissue of regulatory supervision of internationally active banks to the fore, resulting in the1988 Basel Capital Accord and its "Basel II " revision of 2001-2006. More recently, theissue of financial stability in the wake of economic integration and globalization, ashighlighted by the 1997 Asian crisis, has received a lot of attention. Next is relating to themonetary unification of Europe. BIS was the key meeting place for European centralbankers as they laid the groundwork for monetary union from the mid- 1970s to early1990s. Since the increase in globalization, deregulation and sophistication of financialmarkets have focused the attention of the BIS firmly on the issues related to thesoundness of the international financial architecture and the threats posed by systemicrisks(BISA Guide, 2007).
History of Basel
The Basel Committee on banking supervision (the committee) has been dealing with thecreation of a framework to measure capital adequacy on a multinational scale as aguideline for an appropriate capital level of internationally active banks(Bieg & Kramer,2006). It was commenced in respect that a frighteningly low level of the capital whichwas held by most banks worldwide. The aim of the Committee was also include thatremoving the disadvantages in competition between banks which resulted from differentcapital requirements of different states. The results of the Committee¶s work were socalled as International Convergence of Capital Measurement and Capital Standard, it alsoknown as Basel Capital Accord, Basel Capital Adequacy Framework or in short Basel Iwhile it is adoption in July 1988(Bieg & Kramer, 2006). The implementation of Basel Ibecame effective as of the year-end 1992. Meanwhile, Basel I has been changed on asmall scale by amendments and revisions that are amendment to the capital accord toincorporate market risks and also called market risk amendment regarding the treatment