Unit 2. Basel I. Critics.

It reduced the capital requirements for banks.

It increased the number of bank failures.

It created a worldwide benchmark for banking regulations.

It eliminated all banking regulations.

9.3 percent

11.2 percent

8 percent

10 percent

A method to increase regulatory capital.

A technique to reduce bank risks.

A strategy to eliminate capital requirements.

An arbitrage between regulatory and economic capital.

It recognizes diversification effectively.

It covers all types of risks comprehensively.

It allows for unlimited capital requirements.

It has a one-size-fits-all approach.

Issuing new bank regulations.

Selling risky assets to investors directly.

Transferring illiquid assets to a Special Purpose Vehicle.

Transferring illiquid assets to a bank.

It mandates collateral for all loans.

It requires no collateral for loans.

It has a limited recognition of collateral.

It recognizes all forms of collateral.

It was too high for small banks.

It was arbitrary and not based on explicit solvency targets.

It was too low for large banks.

It was based on extensive empirical research.

Securitization of high-quality loans only.

Securitization structured as if loans were directly granted by the SPV.

A technique to increase regulatory capital.

A method to eliminate all risks in securitization.

Market risk.

Operational risk management.

Credit risk.

Strategic risk.

To reduce the number of banks globally.

To eliminate all capital requirements.

To maintain the same regulatory framework as Basel 1.

To address criticisms of Basel 1 and improve risk management.